Spirit Airlines’ collapse, high gas prices and airfares test the limits of summer vacation spending

Rising fuel prices are testing consumers’ desire to travel this summer, whether by plane or car.

Airfares haven’t been this high since May 2022, when airlines emerged from the pandemic due to a shortage of planes and employees to deal with hordes of consumers ready to “travel for revenge.” Gasoline costs more than $4 a gallon and could get closer to $5 a gallon this summer, AAA warned this week.

Jet fuel prices doubled in less than three months this year after the United States and Israel attacked Iran, sparking a conflict that effectively closed a key transportation channel.

Round-trip domestic airfares in April averaged $623, the highest in nearly four years, according to data from the Airlines Reporting Corporation, which tracks travel agency ticket sales. Jet fuel is the second-largest expense for airlines after labor, and carriers say they are increasingly passing those costs on to customers.

Besides, airlines are also scaling back their growth plans due to rising fuel costs. Even if a route isn’t eliminated, fewer flights on some routes means customers will have fewer seats to choose from and, with robust demand, that could drive prices up even more.

Spirit Airlines, America’s most famous low-cost airline, closed its doors earlier this month and partially blamed jet fuel prices for its inability to emerge from near-consecutive bankruptcies. It was the biggest collapse of a U.S. airline in decades. Other airlines moved in to win back those customers afterward, but the carrier’s demise removes a major provider of low fares.

Fuel spikes have paved the way for higher rates and more expensive gas station visits this summer. The start of the peak tourist season, Memorial Day weekend, will be a taste of what travelers will pay to fly, as everything from groceries to clothing has become more expensive this year.

The Transportation Security Administration said it expects to screen 18.3 million people between Thursday and next Wednesday, up from 18.5 million during a similar period last year.

Road trips won’t be a good deal either. AAA forecasts this week that 39.1 million people will travel at least 50 miles between Thursday and Monday, an increase of just 0.1% from last Memorial Day weekend. This is the lowest growth in a decade, AAA told CNBC.

Gas price site GasBuddy predicted this week that U.S. prices would average $4.48 on Memorial Day, up from $3.14 last year, and that prices could average $4.80 through Labor Day “if the Strait of Hormuz remains closed for a significant portion of the summer.”

Leisure travel intentions in the United States were slightly lower in March – at 82.8% compared to 83.1% in the same month a year earlier – although they remained relatively high, UBS said in a note on Monday.

“We believe the moderation in year-over-year travel intentions this year is likely due to rising jet fuel and other geopolitical concerns,” wrote Atul Maheswari, an airline analyst at UBS. He added that travel intention is near its highest level in the last nine years.

So far, airline executives said, customers continue to book and executives are optimistic about the summer travel season. They also said they expected a boost from the FIFA World Cup, which will be held in June and July in the United States, Canada and Mexico, and major concerts such as Harry Styles’ residencies in Amsterdam and London this summer.

United Airlines said it expected to carry 53 million travelers between June and August, 3 million more than last year. American airlines predicted 75 million customers between May 21 and September 8, after Labor Day, surpassing its previous record, in 2019.

Airlines cut schedules and eliminated unprofitable or less profitable routes, but they rushed to fill the gaps after Spirit’s collapse.

Travelers can still find deals if they’re flexible, said Kyle Potter, who runs the website Thrifty Traveler. He recommended using tools such as the “Explore” tool in Google Flights that allow users to search destinations by trip duration and month in a map view.

He also suggested travelers consider traveling on a Tuesday or Wednesday, when fares and traffic are often lower.

“In many cases, this can save you hundreds of dollars per ticket, and multiply that amount by a family of four,” he said.

He had a simple message for travelers sitting on piles of frequent flyer miles.

“Now is the time to use your miles or your credit card points, or both,” he said, warning that miles can end up being devalued. “What are you waiting for? I think a lot of people are accumulating their miles because they want to go to Europe in 2027.”

—CNBC Contessa Brewer contributed to this report.