It appears that budget carriers are dominating the airline world in 2018. New carriers offering low-cost fares are popping up around the globe and allowing passengers to travel to new destinations for less money than ever before. However, a serious threat is looming over the heads of budget carriers that could completely change everything. That threat is higher fuel costs.
Just how serious is the looming fuel crisis in the airline industry? Prices have increased by about 15 percent since the start of 2018. The trend isn't showing any signs of slowing down as the airline industry prepares to enter the busy summer travel season. Passengers who booked tickets months ago may be immune from feeling the spike. However, airlines are being squeezed as they try to balance the need to attract customers with low rates and the reality that they're paying more for fuel. Raising summer airfare rates as a way to create a buffer against rising fuel costs isn't a smart move for airlines trying to keep afloat during the liveliest travel period of the year.
Larger airlines have responded to the fuel squeeze by cutting some of their low-performing routes. Smaller budget airlines have less freedom to cut routes because they typically offer fewer routes to begin with.
Just how high does the cost of fuel have to go before budget carriers face a real crisis? The general consensus is that budget airlines will face a crushing blow if and when oil reaches $80 per barrel. However, that is unlikely to happen before winter. Established budget airlines are probably going to be able to weather the storm if oil prices do reach $80 per barrel. However, newer and smaller budget airlines may fold under the pressure. Budget airlines throughout Europe are being seen as being especially vulnerable to spikes in fuel prices.