Airlines are trimming routes as fuel prices soar

Autumn officially begins this week, and for airlines, that means the end of the busy summer travel season, and the beginning of the typical seasonal slowdown in demand.

This year’s slowdown coincides with rising jet fuel prices, which is making airlines reconsider certain routes.

Despite all the dire warnings about high jet fuel prices and potential shortages heading into summer, Charles Duncan, a partner at AltitudeX Aviation Group, said that the busy season turned out well for airlines.

“Demand has been red hot,” Duncan said. “Of course, high fuel prices are not welcome, but I think overall, the airlines have done well.”

That’s largely because they were able to pass on a lot of those costs in the form of higher airfares. But heading into fall and winter when fewer people travel, Duncan said it’s a different story.

“When you couple the weaker demand with a spike and even more elevated cost of jet fuel, that is a challenge for the industry,” he said.

At the beginning of the year, jet fuel was a little over $2 a gallon on average. Now, it’s at $4.50 a gallon. Robert W. Mann Jr., an industry analyst and former airline executive officer, said that airline executives are not expecting that cost to come down any time soon.

“And the result is that routes that were reasonably profitable — and expected to be so — simply cannot be flown profitably at these higher prices,” Mann said.

So, airlines are starting to cut some of them to reduce their losses.

“Both routes and times of day on routes that are less profitable,” he said.

Like flights that leave mid-day or mid-week. George Ferguson, global head of aerospace defense and airline analysis at Bloomberg Intelligence, said these cuts signal to him that airlines don’t have quite as much pricing power right now as they may have thought.

“So, they're again dialing back their offerings, trying to boost the ticket prices, so they can recover all their increased costs,” Ferguson said.

Jet fuel, of course, plus maintenance and labor costs.

“Airlines have the same challenge that the rest of us do right now, and that is that everything is going up in price,” Ferguson said. “Everything.”

And Ferguson said that if costs keep climbing, we may see airlines cutting back even more into next year.