When the war began, jet fuel doubled, and airlines did what you’d expect: they raised fares and blamed fuel. Fair enough. But jet fuel is now down 40% from its April peak — and the fares never came back down. By Deutsche Bank’s count, carriers have raised fares eight times since the war began. The average domestic round-trip booked through travel agencies hit $628 in May, up nearly $100 from a year earlier, per the Airlines Reporting Corp. Alaska Air’s CFO was refreshingly direct about the math: today’s tickets cover “the spot price of fuel in their entirety.” The surcharge outlived the thing it was supposedly charging you for.
What actually changed wasn’t the fuel — it was the competition. Spirit shut down in May, and the industry’s tone shifted almost overnight. Delta (DAL) and United (UAL) are at record stock highs. American (AAL) is up 30% in a month and is boosting third-quarter domestic schedules 4.6%. Southwest CEO Bob Jordan said the quiet part out loud: “I’m actually very bullish… with Spirit out of business, I think that helps that environment.” When the discounter dies, everyone else’s “environment” improves — environment here being a polite word for your wallet.
The same logic is now writing checks in Europe. Castlelake — a private-equity firm with $38 billion under management whose stakes and clients already include Frontier, Qantas, and Etihad, and which took 32% of SAS in 2023 — agreed in principle to buy easyJet at £6.90 a share, roughly £5.5 billion (~$7.3 billion). That’s 24% above Friday’s close and a striking 75% above where the stock sat before the interest was disclosed. easyJet jumped 9.3% to £6.10 on the news; rival Ryanair, telling you everything about the sector’s repricing, is up 72% over the same period. Private equity does not pay 75% premiums for companies it expects to compete on price.
One honest caveat from the analysts: Melius Research’s Conor Cunningham notes the real test comes after Labor Day, when summer demand fades and we learn whether the new fares hold in the off-season. Maybe discipline cracks. But the structure — fewer carriers, fuller planes, a bankrupt discounter, and PE buying the survivors — argues that the era of airfare deflation is over.
Traveler’s note: book early — in a consolidated market, waiting rarely gets rewarded — and stop expecting the “war surcharge” to be refunded; the war’s fuel spike is gone and the fare isn’t following it down. Budget travel for a retiree household should now assume fares rise with pricing power, not fall with oil. Investor’s note: what you just watched is the birth of pricing power — the ability to keep a price increase after its excuse expires. That trait, durable and defensible, is exactly what our dividend and cash-flow screens hunt. We just prefer to find it in politer industries: companies that raised prices without a war and kept raising dividends through the cycle, rather than airlines, whose pricing power historically lasts precisely until the next fare war or the next fuel spike — with WTI at $68.55, they’re currently enjoying both tailwinds at once.
First, book holiday travel earlier than feels natural and treat the $628 average as a floor in your planning, not a ceiling. Second, when a company keeps a price hike after the cost that justified it collapses, recognize it for what it is: pricing power — annoying as a customer, valuable as an owner. Third, check that the income side of your portfolio owns businesses with that trait in durable form — the kind that shows up as decades of dividend growth, not one great post-bankruptcy summer. Fourth, mark your calendar for the post–Labor Day fare data; it will tell us whether this is a new structure or just a hot season.