Spirit Airlines collapses, gas prices soar, airfares test the limits of summer vacation spending

Rising fuel prices are testing how much consumers want to travel this summer, whether by plane or car.

Airfares haven’t been this high since May 2022, when airlines emerged from the pandemic with a shortage of aircraft and employees and faced a swarm of consumers looking to take “revenge travel.” Gasoline prices are above $4 a gallon and could approach $5 a gallon this summer, AAA warned this week.

Jet fuel prices doubled in less than three months after the United States and Israel attacked Iran this year, sparking a conflict that effectively shut down a major shipping route.

Domestic round-trip airfares averaged $623 in April, the highest level in nearly four years, according to data from the Airlines Reporting Corporation, which tracks travel agent ticket sales. Jet fuel is airlines’ second-biggest expense after payroll, and airlines say they are increasingly passing that cost on to customers.

Separately, airlines are also scaling back their growth plans due to rising fuel costs. Even if routes aren’t cut, fewer flights on a particular route could mean fewer seats for customers to choose from, which could push prices higher if demand is strong.

Spirit Airlines, America’s best-known low-cost airline, shut down earlier this month, blaming jet fuel prices in part for keeping it out of a series of near-bankruptcies. It was the largest US airline bankruptcy in decades. In the aftermath, other airlines swooped in to capture these customers, but its demise meant the end of a major provider of low fares.

Rising fuel prices are setting the stage for fares to rise this summer and gas station usage fees to rise as well. With prices on everything from food to clothing rising this year, Memorial Day weekend, the start of the peak travel season, will test how much travelers will spend on airfare.

The Transportation Security Administration said it expects to test 18.3 million people between Thursday and next Wednesday, compared to 18.5 million people tested during the same period last year.

Road trips aren’t cheap either. AAA expects 39.1 million people to drive at least 50 miles between Thursday and Monday this week, an increase of just 0.1% compared to the previous Memorial Day weekend. AAA told CNBC this was the slowest growth in a decade.

Gasoline price site GasBuddy predicted this week that prices across the U.S. will average $4.48 on Memorial Day, up from $3.14 last year, and could average $4.80 by Labor Day “if the Strait of Hormuz remains closed for a significant portion of the summer.”

UBS said in a note on Monday that U.S. leisure travel intentions in March were 82.8%, down slightly from 83.1% in the same month last year, but still relatively high.

“The slowdown in travel intentions this year compared to last year is likely due to higher jet fuel prices and other geopolitical concerns,” said UBS aviation analyst Atul Maheswari. He added that travel intentions are near the highest in nine years.

So far, customers are still making reservations and executives are optimistic about the summer travel season, airline executives said. They also said they were hoping for a boost from the FIFA World Cup, which will be held in the United States, Canada and Mexico in June and July, and big concerts such as Harry Styles’ residencies in Amsterdam and London this summer.

united airlines said it expects to carry 53 million travelers from June to August, an increase of 3 million from last year. american airlines predicts that it will have 75 million customers between May 21st and September 8th after Labor Day 2019, surpassing its previous record.

Airlines have been cutting schedules and eliminating unprofitable or unprofitable routes, but they are eager to fill the gap after Spirit’s collapse.

Kyle Potter, who runs the website Thrifty Traveler, said travelers can still find great deals if they are flexible. He recommended using tools such as the “Explorer” tool. google Flights where you can search destinations by travel period and month in a map view.

He also suggested travelers consider traveling on Tuesdays or Wednesdays, when fares and traffic are often cheaper.

“In many cases, this can save hundreds of dollars per ticket, which can be multiplied for a family of four,” he said.

He had a simple message for travelers who are accumulating tons of frequent flyer miles.

“Now is the time to leverage miles, credit card points, or both,” he said, warning that the value of miles could eventually decline. “What are you waiting for? I think a lot of people are saving up miles because they want to go to Europe in 2027.”

—CNBC’s Contessa Brewer contributed to this report.