Soaring Airfare Prices are Dampening the Recovery of USA Airlines

Jet fuel in the US has been rising in recent months and it’s threatening the recovery of the Aviation sector from the two-year-long covid-19 restrictions. The price has been rising, especially on the East Coast, due to its dependency on European imports for Jet fuel. The costs of imports from the European country are high due to the ongoing war between Russia and Ukraine, which disrupted gas and oil supply and made transportation and exporting costlier. The hike in fare prices has a high chance of undermining the expected recovery (due to easing restrictions on international borders) of the aviation sector and impacting the US economy, which is already struggling due to the inflation and decreasing value of the US dollar. American Airlines, unlike the European airlines, transfers the fuel hike directly to fare costs which concern the government that rising fares may lead to poor performance in the airline industry.

The price of jet kerosene in the US market reached a record high value not only in terms of aviation fuel, but it has been traded at the highest level of any transportation fuel for the last 41 years in the American market. The spike in jet kerosene is a local issue as other countries are seeing far lower price hikes. The US refineries were more interested in producing diesel than Jet kerosene, which is one of the reasons behind the entire higher price hike in the American market. Several airlines have begun to reduce their flight schedules to keep their costs in check. The high fuel costs also led to lower fuel consumption in the US airline industry. America consumes 11.4% of jet kerosene, lower than in the pre-pandemic phase (FEB 2019) and 5.4% lower than in January 2022.

According to ChemAnalyst, the price of jet kerosene in the American market is expected to rise as the conflict in the East European region seems to be worsening, and the inflation will further drive up the price of Jet kerosene.