The past two years have been kind to the airline industry: cheap fuel and rising add-on fees have meant industry profits, but the fuel part of that equation may be in danger over the next couple of years.
The record profits of the past two years have more than paid the industry back for the losses caused when crude oil prices spiked over $140 a barrel starting in 2008; in January 2016, it had fallen under $30. But the price has been inching up again, hitting $70 last week. Fuel is one of the two biggest operating expenses for airlines; pay is the other.
The U.S. Big Three, United, Delta and American have all had fuel cost increases of over 20% this year and expect the same or more this year. While increased traffic and fuller planes can overcome some of that, at some price point the airlines will want to turn to higher fares to offset dropping profits; the big question is whether the public will pay, or fly less.
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