Airline prices may increase to offset fuel costs as demand surges
Delta Air Lines says it will need to increase the cost of tickets between $15 and $20 each way on an average ticket value of $200
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Major airlines are facing higher fuel costs as they approach the prime spring break travel season. However, with demand surging, some major carriers are confident they'll be able to offset the higher costs.
In some cases, this may mean higher ticket prices.
During the JPMorgan Industrials Conference on Tuesday, Delta Air Lines President Glen Hauenstein said, "we need to recapture somewhere between $15 and $20 each way on a ticket, on an average ticket value of about $200, so somewhere under 10%."
People sit under Delta sign at Salt Lake City International Airport on July 1, 2021, in Salt Lake City. (AP Photo/Rick Bowmer, file / AP Newsroom)
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However, "given the fact that demand is so strong," Hauenstein said the airline "very confident" in its ability to achieve this.
"I'd say we're well on our way to recapturing that, and we feel very confident that we will capture it in the second quarter," he said.
United is also projecting "fuel prices to be high." However, United Chief Commercial Officer Andrew Nocella also expressed extreme confidence in the airline's ability to recapture "a large chunk of that" by adjusting its flight schedule and high demand.
People are seen by the United Airlines counter at the Newark International Airport in New Jersey, United States on December 27, 2021. (Tayfun Coskun/Anadolu Agency via Getty Images / Getty Images)
AIRLINES SLASH FLIGHTS AMID RISING FUEL, OIL PRICES
"As some of my colleagues before me that got up here tell you demand is just incredibly strong right now and we're really bullish on the future and the setup for the next six months and beyond," Nocella said.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AAL | AMERICAN AIRLINES GROUP INC. | 14.61 | +0.09 | +0.62% |
| UAL | UNITED AIRLINES HOLDINGS INC. | 97.44 | +0.61 | +0.63% |
| DAL | DELTA AIR LINES INC. | 63.41 | -0.41 | -0.64% |
Likewise, American Airlines CEO Doug Parker also acknowledged that fuel prices, the carrier's largest expense, are also up. However, Parker said that cost is being offset by increased revenues.
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"The demand is higher than it has ever been. I am certain you will hear from other airlines today all sorts of fun facts to tell you how strong demand is and how strong bookings are," Parker said.
People check in at the American Airlines counter in the Fort Lauderdale-Hollywood International Airport on July 16, 2020 in Fort Lauderdale, Florida. (Photo by Joe Raedle/Getty Images / Getty Images)
He noted that the airline is seeing a 15% increase in ticket purchases.
"Even though we have less inventory, even though we don’t have international travel, even though we have less business travel, 15% higher revenue," he said. "That just says, if nothing else, demand for travel is really strong. "