With Oil Prices Soaring and Fuel Costs Rising... US Airlines 'Grinning' Amid Exploding Demand

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Airlines are smiling broadly amid soaring oil prices caused by Russia's airstrikes on Ukraine. Fuel costs are expected to rise by 20-30%, leading airlines to increase ticket prices, but customer demand has explosively surged since the COVID-19 pandemic.

On the 15th (local time), according to the Wall Street Journal (WSJ) and others, Glen Hauenstein, Chairman of Delta Air Lines, said at an investor conference, "We are witnessing demand soaring to an unprecedented level," and predicted that the impact of rising oil prices would not be significant.

Airlines, which faced business difficulties due to COVID-19, have recently seen rapidly increasing demand following the spread of the Omicron variant at the end of last year. As oil prices surged, fuel costs are expected to rise by 20-30%, prompting airlines to raise ticket prices accordingly. Usually, when ticket prices increase, demand decreases, but airline executives are expressing confidence in the strong demand.

Chairman Hauenstein stated that an average ticket price increase of $15-20 is necessary to cover the rise in fuel costs, but he believes there will be no problem achieving this and expects to fully recover 100% of fuel costs by the second quarter. Doug Parker, CEO of American Airlines, said, "We will be able to make a profit even if oil prices exceed $100 per barrel."

Major U.S. airlines expect first-quarter revenue this year to exceed the forecast made in January. Following this news, U.S. airline stocks rose. Delta Air Lines' stock price increased by 8.70% compared to the previous day, and American Airlines also rose by more than 9%.