Alaska Air says fares will stay high - even if jet fuel price drops

Alaska Airlines expects higher fares, driven by higher jet fuel prices amid the Iran war, might be here to stay.

Speaking to investors on Tuesday, CEO Ben Minicucci told analysts he was optimistic the company would still hit a long-term financial goal of reaching $10 earnings per share. Because of the volatility of fuel prices, as a central source of jet fuel remains blocked amid the conflict in the Middle East, though, Minicucci backed off the three-year timeline the company outlined when it set the goal in December 2024.

Still, his long-term confidence comes from the assumption that fuel prices will dip, but the increase in airfares will remain, he indicated.

"Some of these fare increases are sticking," Minicucci said.

Alaska's Chief Commercial Officer Andrew Harrison echoed that sentiment, telling analysts that even with the increased cost of a ticket "people want to fly, airplanes are full."

The executives, like their counterparts at other airlines, were putting a positive spin on an otherwise disappointing quarter. Expenses are up, leading to worse than anticipated financial results, but demand is strong and airline executives are optimistic they can recover some of the unexpected loss, even at a cost to the consumer.

Alaska Air Group said Monday it had lost $193 million, or $1.69 per share, in the first three months of the year due to the rise in fuel prices, as well as unrest in Puerto Vallarta, Mexico, and historic storms in Hawaiʻi that led to lower consumer demand in those markets.

Alaska Air Group - which includes Alaska Airlines, Hawaiian Airlines, regional carrier Horizon Air and ground support company McGee Air Services - suspended its financial guidance for the rest of the year due to uncertainty around fuel prices.

It expected the price of jet fuel to continue to rise, from an average of $2.98 per gallon in the first quarter of the year to $4.50 per gallon in the second quarter. That increase cost Alaska an extra $100 million in the first three months of the year and will likely add an extra $600 million in expenses between April and June.

To offset the cost, Alaska has raised ticket prices, increased fees for checked bags and proactively cut some routes in May and June.

The capacity cuts affect only a small number of flights, a spokesperson said on Monday, after the company reported its financial results for the first quarter. The reductions mostly affect late-night departures in high-frequency markets, the spokesperson said.

The increased baggage fees kicked in for flights in North America booked on or after April 10, with Alaska Air tacking on an extra $5 for the first checked bag and an extra $10 for the second and third bags. The increase won't affect members of the airline's Atmos loyalty program or credit card holders.

The average fare has gone up by about $25, Minicucci said on a CNBC interview on Tuesday.

But that helps the airline cover just one-third of the cost of the fuel-price spike, he continued. "What we need is for fuel prices to come down at least $1 per gallon from where they are," Minicucci said.

Put another way, it will take a long time before Alaska profits off the increased fares. It has increased fares about 15% on average, but has seen fuel prices more than double.

In the industry overall, airfares this week are up about 24% compared with the same week in 2025, according to data from aviation analytics company OAG.

Delta Air Lines, Sea-Tac Airport's second-highest volume airline after Alaska, similarly suggested this month that airfares may stay elevated as the carrier works to "recapture" some of the additional expense from raised fuel prices.

In a CNBC interview, CEO Ed Bastian said the "degree in which we can retain any of the pricing strength that we talked about" will help the company's future financials.

The fare increases, and the industry's commentary, has started to catch the attention of lawmakers. Last week, U.S. Rep. Ritchie Torres, a Democrat from New York, wrote a letter to the CEOs of Delta, United, JetBlue and Southwest urging them to bring ticket prices down as the cost of fuel decreases.

"If airline pricing is tied to fuel costs on the way up, it has to be tied to fuel costs on the way down," he wrote on X. "No more one-way pricing. Commit to passing savings on to consumers."

U.S. Sen. Maria Cantwell, D-Wash., pointed to the jet fuel price surge as a reason to invest more heavily in alternative fuel options, particularly sustainable aviation fuel.

"Let's get out of the way of diversifying our fuel source, so that we're not so dependent on Middle East oil," she urged U.S. Energy Secretary Chris Wright at a hearing on Tuesday.

For Alaska, the issue of elevated fuel prices isn't new, its executives reminded analysts on Tuesday.

Because of its position as a West Coast-based carrier, where it has access to fewer refineries and more geographic hurdles to bringing fuel to its hubs, the carrier has historically had a 10-15 cent "fuel disadvantage," Alaska's Chief Financial Officer Shane Tackett said.

There's strong interest in addressing this, Tackett said, including by building infrastructure to truck more fuel into Seattle.

But those are "long-tail investments," he cautioned. "It's nice to talk about them but it's probably a ways away."

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