Global airlines are facing the brunt of surging jet fuel prices. Approximately two million passenger seats have been removed from May 2026 flight schedules after carriers are forced to shrink networks or risk insolvency. The trigger was the Iran war, which began in late February 2026 and has since caused jet fuel prices to roughly double. As American travelers absorb the loss of Spirit Airlines, the question arising is which low-cost carrier goes next?
Jet fuel is typically the single largest operating cost for any airline accounting for about a quarter of airline operating expenses, and the Strait of Hormuz blockade-led spike has left budget carriers with almost no margin to absorb. The cost of fuel in March was $3.13 per gallon, up 74 cents, and 31 per cent over February. Fuel use rose 20% in March, according to USDOT, which has compressed route economics across the board. The Iran conflict constrained key transit routes, which drove up prices, shrinking supply ahead of peak summer travel demand.
For context, airlines spent $3.88 billion in March 2025 on jet fuel, far below the $5.06 billion they spent in March of this year. In order to sustain, many US carriers have increased air fares and baggage fees while cutting some routes to cut costs.
Spirit Airlines, the ultra-low-cost carrier thatceased operations before the fuel crisis peaked, had already removed 21.3 million seats from the US air connectivity network, wiping off 4.5 per cent of domestic low-cost capacity in a single stroke. Its collapse, which was in part due to the fragile economics of operating thin-margin routes, paints a picture of what sustained high fuel costs can do to carriers without pricing power or fuel hedges.
The Association of Value Airlines, the trade group representing US budget carriers, has since petitioned Washington for a $2.5 billion federal relief package to offset the fuel cost surge.
The major US network carriers are absorbing the shock by reducing capacity and hiking fee rather than cutting the routes, which would mean a drastic step.Delta Air Lines cut capacityby 3.5 percentage points and implemented multiple fare and fee increases to compensate for what analysts estimate is an additional $2.5 billion in fuel costs. United Airlines has outlined a 5 per cent capacity reduction running through September 2026. There's no existential risk to both carriers, but these moves mean fewer seats and higher fares for passengers planning vacations this summer.
Budget carriers are structurally in a weaker position. Unlike legacy airlines, low-cost operators typically carry less cash, hedge fuel at lower volumes, and rely on high aircraft utilization to stay profitable. But when the fuel costs double and seat counts shrink, the business model crumbles.
'Every route Spirit used to fly cheap is now either gone or $200 more on a legacy carrier,' a frequent traveller noted in a post on Reddit, expressing his frustration.
Major airlines are not entirely immune. Lufthansa, Germany's flagship carrier, cancelled 20,000 flights between May and October 2026 to conserve an estimated 40,000 metric tonnes of jet fuel. The airline also halted operations at its CityLine regional subsidiary for the same period, both of which are the most aggressive single-carrier moves globally. Australia's Qantas and its low-cost unit Jetstar also reduced capacity while Air Canada suspended its full-year 2026 financial guidance due to volatility, even as its fuel hedging program cushioned some of the immediate impact, Bloomberg reported.
In addition to that, a government shutdown late last year forced a 10 per cent flight capacity reduction at 40 major American airports due to air traffic controller shortages, according to Reuters. That reduction added a domestic supply constraint on top of the fuel-driven cuts, further tightening available seats heading into peak summer travel season.
Source: International Business Times UK
