Airlines Brace for Years of Pain as Executives Warn "Inflation Will Make People Poor," per Financial Times
Airlines are bracing for years of pain, per the Financial Times.
"Inflation will make people poor," one airline executive said, per the Financial Times, in a report headlined with that warning as carriers gathered in Lisbon.
Executives at the world's leading airlines now believe high jet fuel prices have become the new normal since the outbreak of the US-Iran conflict, per the Financial Times, and they are preparing for challenges over the coming years.
"A Difficult Three to Five Years"
"I think we are going to have a difficult three to five years ahead of us," Luís Rodrigues, CEO of TAP Air Portugal, told the Financial Times. "Demand is still there... But our ability to raise prices is limited."
Rodrigues was speaking at an aviation conference in Lisbon, where the Financial Times reported multiple airline executives saying they expect to scale back growth plans.
Another unnamed airline chief executive warned, "There is going to be demand destruction at some point," while another argued energy prices "change the equation for everyone," per the Financial Times.
Airlines had previously hoped energy costs would fall after the sharp surge caused by the closure of the Strait of Hormuz. Executives now expect fuel prices to stay elevated for a prolonged period, per the Financial Times.
Hedges Are Running Out
Major European carriers operated this summer with fuel mostly contracted at prices from before the US-Iran war.
Those pre-war hedges are progressively unwinding. Carriers must now buy future supplies at current, inflated prices, or let their hedges lapse and gamble on prices falling.
Jet fuel in Europe was priced at almost $208 a barrel last week, up 128% year on year.
Italy's ITA Airways shows the squeeze. The carrier had secured approximately 80% of its fuel requirements before the crisis began but has signed no new contracts since, per the Financial Times, leaving it more exposed next year, CEO Jörg Eberhart said.
A leading energy analyst told a separate airports conference in London that jet fuel prices "will remain exceptionally high" for up to a year even if oil flows freely through the Strait of Hormuz.
Demand Has Held, For Now
The near-term picture is not yet a collapse. Delta Air Lines said demand had barely weakened despite an average 20% increase in ticket prices this month, per the Financial Times reporting.
Manchester Airports Group chief strategy officer Andrew Macmillan offered the other side of that resilience in London: "People are still willing to travel, [but] how much longer, I don't know."
"I don't think we should be complacent," Macmillan added. "Winter is going to be difficult for airlines."
That is the core tension for the industry: fares must increasingly reflect current fuel prices or carriers lose money, but each increase tests how much inflation-squeezed passengers can pay.
What It Means for Markets
U.S. carriers face the same fuel math as hedges roll off, and traders should expect guidance, not demand headlines alone, to drive the group.
Delta is the early tell on whether higher fares stick. Watch DAL for flow after its comment that demand barely weakened despite a 20% average fare increase.
United is the other large network carrier most exposed to international fuel pricing. UAL options flow is worth watching into winter schedule updates.
American has the tightest margin for error in the group. AAL tends to see heavy hedging when fuel headlines worsen.
Southwest offers a domestic-only read on the U.S. consumer. LUV will show whether leisure demand cracks first.
For the sector as a whole, the U.S. Global Jets ETF bundles the exposure. JETS is the cleanest way to track broad airline sentiment through the winter.
The Bottom Line
Airline executives are no longer treating high fuel as a spike to wait out. They are planning for three to five difficult years, with higher fares as the only offset and inflation limiting how far those fares can go.
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