βWe're starting to see airlines cut back capacity because they're just no longer going to fly unprofitable routes. A route that wasn't making money at $2 a gallon jet fuel is certainly not going to be making money at $4 a gallon.β
βThey think airfare has been an incredible deal over the last couple of years. It just hasn't gone up as quickly as inflation. They think prices deserve to be higher, basically, and would like them to be higher.β
Strait of Hormuz closure blocks global fuel supply
βSince the Strait of Hormuz has been closed due to the conflict, about 20% of the world's jet fuel has not been able to get to global markets and pass through the Strait of Hormuz. And that has been a big problem for the jet fuel supply for airlines.β
βSince the conflict began, the price of jet fuel has more than doubled to a record high of over $200 a barrel. That's a huge issue for airline companies because jet fuel makes up about 25% of their expenses.β
βTicket prices are already up like 20% right now, and they seem pretty confident that by the end of the year, they'll be covering almost the whole run up in fuel prices, if not all of it, through higher fares.β
βThe United States is actually, as a single country, is the world's largest producer of jet fuel by a long measure. So the United States, when it comes to energy, is in a good position here. The United States is the jet fuel superpower.β
Spirit Airlines faces potential government bailout
βThe first real domino to fall is Spirit, which was in bankruptcy for the second time in less than a year, like a really vulnerable airline to start with. It had an agreement with its creditors to come out of bankruptcy, and that agreement has just been sort of totally upended by fuel prices.β