US airlines are raising prices – and travelers are still booking

Jet fuel prices have soared this year since attacks on Iran that began two months ago led to the effective closure of the Strait of Hormuz. For now, airline executives say travelers are continuing to fly and increasingly covering the bill.

The price spike hit just before spring break and is eating into airline profits this year. But booking trends show resilient consumers are prioritizing travel, and executives have a good outlook for the peak summer demand months, which now end in August. Questions remain about how demand will hold up toward the end of the year, as travelers don’t tend to book that far in advance.

In March, travel agency ticket sales rose 12% from a year ago to $10.4 billion, with domestic travel up 5% and international travel up 1%, according to Airlines Reporting Corp.

Domestic economy ticket prices rose 21% from a year earlier to an average of $570, while premium seat prices rose 17% to an average of $1,444 per trip, according to ARC data released April 16.

Despite the increase in prices, “reservations have remained resilient in the face of these changes, which is an encouraging sign.” JetBlue Airways CEO Joanna Geraghty said Tuesday during an earnings call.

U.S. airlines have said the war in Iran will add more than $6 billion to their costs this year.

But JetBlue and major carriers told Wall Street this month that they expect customers to cover higher jet fuel costs by early 2027 or even the end of this year. Carriers have reduced capacity to reduce costs, which can also increase airfares.

JetBlue forecast Tuesday that second-quarter revenue would increase as much as 11% from a year earlier, although Geraghty called the impact of war the industry’s biggest headwind since the Covid pandemic.

American airlines said Thursday it expects a 13.5% to 16.5% increase in revenue for the second quarter.

“We’ve always been very careful in terms of managing our load factors, and we’re seeing our loadings keep pace with capacity additions,” U.S. CEO Robert Isom said during an earnings conference call. “This suggests that we are currently seeing a real benefit in terms of yields.”

Delta Airlines And United Airlineswhich account for the majority of U.S. industry profits, have also been optimistic about fare growth, especially as airlines rely more on the growth of seats like first class or premium economy that can cost thousands of dollars more than economy options.

Domestically focused budget airlines, which tend to offer fewer premium options, have struggled. Low-cost carriers represented by the Association of Value Airlines, including Border Airlines and Avelo Airlines are seeking $2.5 billion in relief from the Trump administration to help cover rising fuel prices, the group announced Monday.

Border is expected to brief Wall Street analysts next week on its outlook for the year and will likely face questions about its ability to recoup costs with lower average rates than its larger rivals.

Even if oil prices fall, it likely won’t mean immediate relief for jet fuel prices, because the commodity includes refining and transportation costs that take longer to manifest.

“It is possible, given that airline ticket prices have increased well below general inflation since COVID,” that fares will remain high, Atul Maheswari, an airline analyst at UBS, wrote Monday. “As such, we believe it is possible for airfares to rise and remain higher. This could lead to significant profit growth and margin expansion for airlines in 2027 if jet fuel prices moderate. That said, we believe demand would need to remain stable for airlines to maintain their prices next year.”