Airline CEOs are warning that plane tickets are about to get more expensive

  • Fuel prices have shot up nearly 57% a barrel over the past year.
  • Airlines around the world are expecting profits to fall 12% during 2018.
  • American Airlines CEO and others warn that the extra costs could be passed onto passengers through higher ticket prices.

The big news coming out of this year's International Air Transport Association Annual General Meeting is that airlines are feeling the pain from skyrocketing fuel prices and soon consumers will too.

Over the past year, the price of Brent crude oil has shot up nearly 57% to more than $75 a barrel. And things are only expected to get worse for airlines.

9 PHOTOS
Airline rankings according to ACSI
See Gallery
Airline rankings according to ACSI

1. JetBlue Airways Corp.

Photo by Timothy Fadek/Bloomberg via Getty Images

2. Southwest Airlines

Photo by KGrif via Getty Images

3. Alaska Airlines

Photo by mixmotive via Getty Images

4. American Airlines

Photo by rypson via Getty Images

5. Delta Airlines

Photo by rypson via Getty Images

6. Allegiant Air

Photo by Robert Alexander/Getty Images

7. United Airlines

Photo by csfotoimages via Getty Images

8. Frontier Airlines

Photo by Kathryn Scott Osler/The Denver Post via Getty Images

9. Spirit Airlines Inc.

Photo by Balint Porneczi/Bloomberg via Getty Images

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

IATA's latest projections show that the price of jet fuel is going to reach as high as $84 a barrel.

With fuel representing roughly 25% of an airline's overall operating expenses, expect the airlines to pass on the cost to consumers.

According to Reuters, American Airlines CEO Doug Parker, once again, cautioned the crowd at IATA's yearly get together of industry leaders, that ticket prices will go up as airlines reduce the number of seats available for sale to save on fuel costs. 

The CEOs of Air New Zealand and Virgin Australia both echoed Parker's sentiment, Reuters reported

Parker made a similar prediction during the airline's latest earnings call.

"Oil is our second largest expense, so when it increases, the cost of air travel increases," the American Airlines CEO said in late April. In fact, Parker noted that fuel prices surged by an incredible 12% just in the two weeks preceding the call. 

The effect of rising fuel prices is expected to be industry-wide.

IATA expects total profit for airlines around the world to shrink by 12% during 2018 to $33.8 billion even though air travel is projected to grow at a healthy 7%. Airlines from North American are expected to account for $15 billion or 44% of the industry's global profits. That's down from the $18.4 billion in profit generated in 2017. 

Between mid-2014 and early 2015, crude prices fell by more than 55% to roughly $50 a barrel. In the years since cheap fuel and cautious growth coupled with booming demand for air travel have ushered in the most profitable era in the history of US airlines. Lower crude prices have also translated to lower ticket prices. According to the US Department of Transportation, the average price of a plane ticket in the US fell by 15% from $410 in 2014 to $347 in 2017.

NOW WATCH: Former Wall Street CEO reveals how most financial products designed for women completely miss the point

See Also:

SEE ALSO: How JetBlue, Southwest, WOW and other airlines can sell insanely cheap tickets and stay in business

FOLLOW US: on Facebook for more car and transportation content!

Read Full Story

Markets

DJIA 25,758.86 89.54 0.35%
NASDAQ 7,803.91 -12.42 -0.16%
NIKKEI 225 22,199.00 -71.38 -0.32%
HANG SENG 27,598.02 384.61 1.41%
DAX 12,356.86 146.31 1.20%
USD (per EUR) 1.14 0.00 -0.01%
USD (per CHF) 0.99 0.00 -0.13%
JPY (per USD) 110.42 -0.06 -0.05%
GBP (per USD) 1.28 0.00 0.16%