Jet fuel near record high pushes US holiday airfares to a 10-year peak

Travelers planning to fly in the US this holiday season should expect to pay substantially more than they did a year ago, as airlines pass on jet fuel costs that are close to an all-time high. The average US price of jet fuel topped $4.75 a gallon this week, according to the tracking firm Argus — roughly double its level a year earlier.

"Airfares right now are at what we see as a 10-year high because of the high cost of jet fuel," said Hayley Berg, lead economist at the travel technology company Hopper, in an interview with NPR. "Airlines have to pass on these super high jet fuel prices in the form of higher fares to consumers."

Thanksgiving and Christmas tickets cost more

Berg said Thanksgiving airfares are up about 30% compared with last year, while tickets for the Christmas holiday are up more than 20%. Demand, however, has held up. Berg said travel is "really sticky" at this time of year and that travelers are unlikely to change their traditional holiday trips even at higher prices.

US airlines report steady demand despite the increases. On an earnings call this month, Delta Air Lines CEO Ed Bastian said consumers had shown a "limited amount of resistance" and still consider airfare "reasonably affordable" after the fare increases, calling that a good sign for the future.

Europe could see steeper increases

Some industry figures expect fares to climb further next year. Michael O'Leary, chief executive of the European low-cost carrier Ryanair, said in Belgium this week that European airfares could rise 10%, 15% or even 20% next year — which he described as potentially the largest increase in the region's history over a 12-month period.

The outlook may be somewhat better in the US, which has more oil-producing and refining capacity than Europe. Even so, higher fuel costs are weighing on US carriers. Chris Sununu, who heads the trade group Airlines For America, told CNBC that airlines are absorbing most of the extra cost, with some of it necessarily passed on to customers, producing the 20% to 30% increases seen going into the holidays.

Travelers book earlier, or stay home

Berg said consumers are comparing prices more and booking earlier to lock in better deals. She noted that holiday bookings picked up in September, earlier than the usual late-October rush she normally advises.

At Baltimore/Washington International Airport, Herb and Latasha Williams, who flew in from Dallas for a short birthday trip, said their tickets cost hundreds of dollars more than expected. Latasha Williams said a warm-weather holiday in Florida may have to wait. "Maybe next year. Maybe," she said.

Rachel Stern of Frederick, Maryland, said she has been priced out of flying altogether and will drive to Chicago instead, because tickets for her and her children cost too much. Mary Haller of Bethany Beach, Delaware, described "shell shock" at how much economy tickets to Europe had risen in two weeks, but said she has little choice but to buy them, and feels for people who cannot afford the extra cost.

Source: NPR News.