US airlines brace for bumpy ride ahead

That cheap flight you bookmarked a few months ago? It might not be so in-budget anymore.

Major US airlines are raising fares, tacking on extra fees, and rethinking whether some routes are even worth flying in the face of soaring fuel and labor costs.

Tightening their seatbelts: In recent weeks, several airlines have warned of financial hardship due to rising operational costs, as energy price spikes wreak havoc on the industry.

• Spirit Airlines is staring down a possible liquidation after filing for its second bankruptcy in under a year.
• United Airlines CEO Scott Kirby recently floated a potential mega-merger with American Airlines (though the offer was rejected).
• Delta CEO Ed Bastian last week said the airline will need to “find ways” to pass rising fuel costs onto customers.
• Southwest recently cut dozens of routes, while other airlines are trimming less profitable services.

What’s causing the turbulence?

The price of fuel in the US has surged more than 30% since the US-Iran conflict began at the end of February, adding billions of extra dollars to airlines’ operational costs.

• In a recent memo to staff, United Airlines CEO Scott Kirby said jet fuel prices remaining elevated would mean an additional $11 billion/year in costs, or more than 2x what United earned in its most profitable year.
• Historically, surging oil prices have been a catalyst for consolidation within the industry, since bigger airlines have more flexibility to absorb price shocks and manage operational costs.

Zoom out: The upheaval within the airline industry comes as the spring travel season is on pace to be the busiest in US history, with a projected 171 million airline passengers from March 1 through April 30.