Ready for a jet fuel spike?
Airlines have soared to record profits in the past few years thanks to low fuel prices.
Cheap fuel has enabled them to cut airfares and offer raises to flight attendants, pilots, mechanics and ground crews. But the cost of oil can’t stay low forever. And with higher expenses and lower revenue, some airlines might struggle to turn a profit if faced with a sudden fuel price spike.
Some airlines are better prepared than others. Discounters like Spirit Airlines pack more passengers into jets — making them more fuel efficient on a per passenger basis. Others, like Alaska Airlines, fly a younger fleet of jets which guzzle less gas.
The three largest U.S. airlines — American, Delta and United — consume the most fuel and would be hurt the most by a fuel spike. They are quickly updating their fleets with more fuel-efficient aircraft. But will those new planes all enter service before oil prices climb again?
Oil, which sold for above $100 a barrel in mid-2014, has struggled to top $50 of late. But a price spike could be triggered by geopolitical tensions or a sudden shift in supply and demand, as the airline industry has seen in the past.