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US summer travel demand declines as high ticket and fuel prices strain airlines
US airport traffic over the July 4 holiday dropped 2.3 percent from last year. Forty-five percent of Americans are skipping summer vacations due to rising costs, as geopolitical tensions and fuel price increases continue to pressure the industry.
The summer travel season in the US failed to reach the expected momentum due to rising airfare and fuel costs. During the July 4 Independence Day holiday, the number of passengers screened by the Transportation Security Administration (TSA) remained above 7.3 million, marking a 2.3 percent decline compared to the same period last year.
According to a joint poll by NPR, PBS News and Marist College, about 45 percent of Americans are choosing not to take a summer vacation this year due to high travel costs. That figure represents a 2 percent drop compared to last year's data.
Airlines Respond with Price Hikes and Cancellations
Inflation data from the US Department of Labor shows that airfare prices have risen 8.2 percent since February. United Airlines announced it would have to raise prices by up to 20 percent due to rising fuel costs. American Airlines, meanwhile, canceled some flights in August and September.
Low-cost carrier Spirit Airlines filed for bankruptcy in May, ending nearly 30 years of operations. In documents submitted to the bankruptcy court, the company cited geopolitical conflicts and rising fuel costs as reasons.
Geopolitical Tensions Drive Up Oil Prices
US President Donald Trump's announcement that the ceasefire with Iran had ended and new attacks were imminent caused fluctuations in oil markets. The benchmark crude oil price rose 4.84 percent on Wednesday. This further intensified cost pressures on the aviation sector.
John Deal, managing director of capital markets at investment bank Post Oak Group, said, 'There is a statistically significant increase in the number of scheduled flights during the summer, but the war has severely affected airlines' ability to plan and forecast.' Deal stressed that summer travel can account for 40 percent of airline revenues and that price increases in jet fuel affect the market more strongly than gasoline.
European Airlines Also Grapple with Rising Costs
European carriers are facing similar challenges. Lufthansa canceled 200,000 short-haul flights in April as part of a target to reduce fuel consumption by 40,000 tons. International Airlines Group (IAG), which includes British Airways, raised prices by up to 8 percent to offset the increase in fuel costs.
John Grant, chief analyst at travel data firm OAG, said, 'Average airfares have of course risen because fuel prices have gone up. That cost is passed directly on to passengers.'
Airspace Restrictions Add Extra Costs
For European airlines, the problems are not limited to fuel prices. Airspace restrictions imposed because of Russia's war in Ukraine, along with new restrictions over Iran, Iraq and Lebanon, are forcing European carriers to use longer routes. This means higher fuel consumption.
The European Union Aviation Safety Agency (EASA) has warned airlines to avoid certain areas in both Russia and the Middle East. Asian carriers, on the other hand, face fewer restrictions.
Rich Pleeth, who runs an artificial intelligence and logistics company in London, said that although he normally prefers British Airways, he chose a Chinese airline that can use Russian airspace for an upcoming business trip. Pleeth said, 'I have a trip to China at the end of this month and I will fly with a Chinese airline over Russia.'
The Situation for Gulf and Asian Airlines
Middle Eastern carriers, while not directly affected by the Russia war, saw a decline in business following the US-Israeli attacks on Iran. Emirates, Qatar Airways and Etihad Airways lost passengers due to airport closures and travel restrictions in the Gulf region. In contrast, Singapore Airlines announced that its load factor on European flights rose to 93.5 percent in March.
Rich Pleeth said he had to cancel business trips between London and Saudi Arabia, Qatar and the United Arab Emirates in the short term, adding, 'I had planned trips to Qatar, Saudi Arabia and Dubai but they were all canceled. I have a wife and two young daughters at home, and the possibility of getting stranded somewhere has changed my approach to travel.'
Road Travel Preferred
As airfare prices rise, Americans are opting for road travel instead of flying, especially during the July 4 holiday. The American Automobile Association (AAA) estimated that 61.4 million people would hit the road over the weekend, slightly above last year's 61.3 million.
Gasoline prices in the US remain high. According to AAA's daily data, the average price per gallon is $3.79. While that is below the mid-May peak of $4.48, it is well above the $2.98 recorded on February 28, when the US and Israel struck Iran.
Global Fuel Prices and the Strait of Hormuz Impact
Prices measured per liter in other countries are also high: in Canada, 1.87 Canadian dollars (1.32 US dollars); in the Netherlands, 2.20 euros (2.52 US dollars); in the United Kingdom, 1.49 pounds (2.00 US dollars). In China, the per-liter price is 7.71 yuan (about 1.13 US dollars), and in India, 108.71 rupees (about 1.14 US dollars).
Closures in the Strait of Hormuz, through which one-fifth of the world's oil supply passes, have hit Asian markets such as India and China harder than Western countries. Since most of the oil passing through the strait is destined for Asian markets, the supply squeeze is felt more acutely in that region.
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