Why airfare is rising as airline profits get squeezed
Rising fuel costs driven by geopolitical tensions in the Middle East are forcing airlines to increase ticket prices and adjust capacity. Despite higher fares, travel demand remains resilient, though airline profitability is being squeezed by these increased operational expenses.
Why it matters
It explains the economic factors behind the current high cost of air travel and the impact of global conflict on consumer prices.
Volatile fuel prices and resilient travel demand are threatening to keep airfare high this year. Airline profits will be harder to come by.
The Iran war that began at the end of February sent fuel prices to multi-year if not record highs, including for diesel, gasoline and jet fuel, airlines' biggest expense after labor. Supply scares with the Strait of Hormuz disruptions lasting most of this year and high demand have sent jet fuel prices and other distilled products up more than crude oil.
Airline executives aren't expecting much relief in fuel costs anytime soon, or a drop in travel demand.
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