Budget airlines struggle as soaring jet fuel prices reshape travel costs
Rising jet fuel prices are hitting budget airlines hard across the Americas. The surge—driven in part by the Middle East conflict—has forced carriers to adjust fares, cut routes, or shut down entirely. Low-cost airlines, already operating on thin margins, now face even tougher competition for cost-conscious travellers. Jet fuel costs in Mexico jumped by 101% between January and March 2023. This sharp increase has squeezed airlines, with fuel making up 35% to 40% of their total operating expenses. Industry analysts warn that for every 10-cent rise in fuel price per gallon, an airline’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) fall by one percentage point.
Volaris and Viva Aerobus, both known for their ultra-low fares, are among the hardest hit. Volaris responded by raising ticket prices and adding more international flights to offset losses. Meanwhile, Aeroméxico is focusing on passengers willing to pay higher fares when fuel costs push prices up.
The crisis has already claimed casualties. Magnicharters suspended all operations, with experts blaming unsustainable fuel expenses. In the US, Spirit Airlines halted flights after a liquidity crisis tied to soaring oil prices. The fuel price spike is reshaping the airline industry, forcing carriers to adapt or exit the market. Budget airlines must now balance higher fares with the risk of losing price-sensitive travellers. Those unable to adjust face financial collapse, as seen with recent suspensions and shutdowns.
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