Airlines are facing a renewed cost squeeze as the global average price of jet fuel climbed 7.4% week on week to US$194.90 a barrel, according to the latest data from the International Air Transport Association (IATA). 

The latest increase adds to a sharp rise in fuel costs that is forcing carriers to reassess schedules, fares and route economics. Fuel is among the largest costs for airlines, making sudden price increases particularly difficult to absorb. The pressure is already showing up in airline planning across major markets, with carriers looking to reduce flying on routes that have become less attractive as fuel costs rise.

US airlines reassess capacity

In the US, American Airlines, United Airlines and Southwest Airlines are scaling back or reviewing planned capacity following the latest fuel-price surge.

Reuters reported that American is preparing to trim flying further if fuel prices remain elevated, while United is also considering additional reductions. All three carriers said demand remains relatively strong, allowing them to recover part of the higher fuel costs through fares. However, executives indicated that higher operating costs are changing the economics of some flights.

American Airlines has estimated that higher fourth-quarter fuel prices will add around US$1 billion to its fuel bill.

United Airlines, meanwhile, said some flights scheduled for December would be cancelled because of elevated fuel prices, with further adjustments possible if fuel remains expensive into 2027.

Southwest has also reduced the amount of capacity growth it had planned for the year.

The response highlights a key problem for airlines: higher fuel costs do not necessarily coincide with weaker passenger demand. Instead, carriers can face strong bookings while some individual flights become less profitable to operate.

Why airlines cannot immediately pass on the cost

One of the biggest challenges is timing.

Airlines sell tickets weeks or months before a flight operates. When fuel prices rise suddenly, seats may already have been sold at fares that were calculated using lower fuel costs.

This is particularly challenging for low-cost carriers, where competitive pricing leaves less room to absorb sudden increases in operating expenses.

Thailand provides a clear example.

The Nation Thailand reported that Thai budget airlines are being squeezed by the latest fuel increase, with AirAsia unable to recover higher fuel costs on tickets that had already been sold.

Vietjet Thailand said fares were already 20–25% above pre-crisis levels, while the report also highlighted the additional pressure created by Thailand's domestic fuel-tax structure.

For airlines, the result is a widening gap between the cost of operating a flight and the revenue that has already been locked in through advance ticket sales.

Higher fares could follow

The longer fuel prices remain elevated, the greater the pressure on airlines to increase fares.

Ryanair chief executive Michael O'Leary warned earlier this month that there could be a “significant” rise in airfares if oil prices remain high into 2027. The low-cost carrier expects pricing to remain uncertain in the coming months, with the outlook dependent in part on how long elevated energy prices persist.

For passengers, higher fuel costs do not necessarily appear as a separate fuel surcharge. Airlines can instead increase base fares, reduce promotional pricing or adjust capacity on weaker routes. That means travellers could face higher fares even where no explicit fuel surcharge is introduced.

Asia-Pacific carriers under pressure

The impact is also being felt across Asia-Pacific, where low-cost airlines have been particularly exposed to the increase in fuel prices.

AirAsia co-founder Tony Fernandes said on September 18 that the carrier had strong liquidity to withstand soaring jet-fuel costs and was taking steps to strengthen its financial position.

Fernandes said AirAsia expected to raise more than US$1 billion, mainly to refinance existing debt, while continuing to focus on cash management and operational efficiency.

The comments came as the airline faced investor concerns over the impact of higher fuel costs and foreign-exchange losses.

For AirAsia and other low-cost carriers, the ability to maintain competitive fares while protecting margins is particularly important because their business models depend heavily on high aircraft utilisation and price-sensitive passengers.

Fuel hedging offers some protection

Airlines are not all exposed to the fuel-price increase in the same way.

Fuel-hedging programmes can provide carriers with some protection against sudden market movements because airlines may have locked in prices for part of their future fuel requirements.

However, hedges do not eliminate the risk. Protection expires over time, meaning airlines can become increasingly exposed if market prices remain high.

IATA describes fuel as one of the largest, if not the largest, components of airline operating costs and maintains a weekly monitor of global jet-fuel prices.

That makes the duration of the current price spike almost as important as its peak. A short-lived increase can potentially be absorbed through existing hedges, higher fares and cost controls. A prolonged period of elevated prices creates a much more difficult environment, particularly for carriers with limited pricing power.

Route economics come under scrutiny

The immediate consequence is likely to be greater scrutiny of route profitability. Airlines have several levers available when costs rise: raise fares, reduce frequencies, deploy smaller or more fuel-efficient aircraft, cut marginal routes or delay planned capacity growth.

The latest US announcements demonstrate how quickly those decisions can feed into schedules.

American and United are preparing to adjust capacity if fuel prices remain high, while Southwest has already reduced planned capacity growth.

For passengers, this could mean fewer flights on thinner routes, even while demand for air travel remains healthy. The effect may be particularly noticeable on routes where airlines have limited ability to raise fares without affecting demand.

The bigger question for aviation

The latest jet-fuel increase comes at a time when airlines are already navigating a range of cost pressures, including aircraft availability, labour expenses and supply-chain constraints. A prolonged fuel-price shock therefore creates a difficult balancing act. Airlines need to maintain enough capacity to capture strong travel demand while ensuring that individual flights generate sufficient revenue to cover significantly higher operating costs.

For passengers, the consequences could extend beyond higher ticket prices. Fewer frequencies, changes to seasonal routes and reduced capacity on marginal services could all become part of the industry's response if fuel prices remain elevated.

For now, the US$194.90-a-barrel jet-fuel price is becoming an increasingly important variable in airline planning.

The next few months will determine whether carriers can absorb the increase through higher fares and efficiency measures — or whether sustained fuel costs force a broader reshaping of airline networks heading into 2027.