Airline profits plummet as US fuel costs nearly double

Jet fuel prices in the United States are rising sharply ahead of the peak summer travel season as escalating tensions between the US and Iran raise concerns about disruptions in the Strait of Hormuz, a critical passage for global energy shipments.

Fuel costs surged by 78 percent to nearly $6.5bn in April, following a 26 percent jump in March, according to US Department of Transportation data released on Monday.

The cost per gallon (3.78 litres) increased by $1.81 from this time last year to $4.11.

The International Air Transport Association (IATA), which represents more than 370 airlines accounting for about 85 percent of global air traffic, said in its annual report published on Sunday that net profit across the sector would come in at a combined $23bn for 2026, well below a previous projection of about $41bn and down from $45bn in 2025.

IATA said the profit margin will be “the weakest outcome since the COVID years”.

Airfares in the US have jumped 5.5 percent since the war began — 2.7 percent in March and another 2.8 percent in April — according to the US Labor Department’s Bureau of Labor Statistics, amid strains on the jet fuel supply.

“Jet fuel availability is threatened, and the price has roughly doubled since late February,” IATA said in its report.

Despite the fuel price increase, domestic flights are still being booked for the busy US summer travel season. The American Automobile Association forecast a jump in domestic travel during the Memorial Day holiday weekend, May 23-25, considered the unofficial start of summer. The group projected that 3.6 million travellers would take domestic flights.

Yet, airlines are facing increased pressure that, in some cases, is putting them out of business. Budget carrier Spirit Airlines ceased operations in early May after three decades in service. In court filings, the airline attributed its collapse to surging fuel prices.

In April, United Airlines CEO Scott Kirby said the Chicago-based airline would need to raise prices by up to 20 percent amid the surging costs.

Last week, American Airlines announced it would temporarily suspend some flights amid soaring prices. Routes impacted include several transcontinental services, including Charlotte to Sacramento and Los Angeles to Pittsburgh.

The US-Israeli strikes on Iran in late February and Iran’s subsequent retaliation have also forced major global airlines to reroute flights around closed and restricted airspace, increasing fuel burn and straining already tight capacity.

Global carriers, especially European-based airlines, were already facing pressure on Asia-bound routes because of the closure of Russian airspace amid the ongoing war in Ukraine.