Airlines face higher labor, maintenance, and operating costs
October 27, 2026
Lower fuel prices don't guarantee cheaper tickets: Jet fuel is a major airline expense, but it is only one factor determining what passengers pay.
Airlines have other rising costs: Higher wages, aircraft maintenance expenses, and limited availability of new planes are keeping pressure on airline budgets.
Supply and demand may matter most: If travelers continue buying tickets at higher prices, airlines have little incentive to lower fares, even when their fuel costs decline.
For airline passengers hoping that a decline in oil prices will bring some relief to their travel budgets, the outlook may be disappointing.
Although jet fuel is one of the airline industry's largest operating expenses, cheaper fuel does not automatically translate into lower ticket prices. In fact, several structural changes in the airline business could keep fares elevated long after fuel prices go down.
The reason is that airlines don't simply calculate the cost of operating a flight and add a fixed profit margin. Instead, they generally charge what the market will bear, using sophisticated pricing systems that respond to demand, competition, and the number of available seats.
That means a reduction in operating costs can improve an airline's profitability without necessarily producing savings for consumers.
Fuel prices are only part of the equation
Fuel typically accounts for roughly one-fifth to one-quarter of major U.S. airlines' operating expenses, although the share varies considerably with oil prices.
When fuel prices rise sharply, airlines face pressure to recover those costs through higher fares, fees, or other revenue. But when fuel prices decline, the reverse doesn't necessarily happen.
Airlines may use the savings to offset other expenses, repair their balance sheets, or improve profitability.
There is also a timing issue. Some carriers purchase fuel under contracts or use financial hedging arrangements that can delay the effect of changing oil prices. Consequently, lower crude oil prices don't always produce an immediate reduction in an airline's actual fuel costs.
And jet fuel prices do not always move in perfect lockstep with crude oil prices.
Higher labor costs aren't going away
One of the biggest changes in airline economics has been the rising cost of labor.
Airlines have negotiated new contracts with pilots, flight attendants, and other employees, with many providing substantial pay increases. Those increases are generally built into multiyear agreements. Unlike fuel prices, wages don't typically decline when economic conditions change.
Airlines also face higher costs for employee benefits, training, and recruiting workers in specialized occupations. These expenses create a higher baseline cost for operating flights, regardless of what happens to oil prices.
Aircraft shortages are limiting available seats
Another factor is the limited availability of new commercial aircraft.
Manufacturing delays and supply chain disruptions have made it difficult for some airlines to obtain new planes on their original schedules. Meanwhile, certain engines and aircraft components have required additional inspections or maintenance, temporarily removing aircraft from service.
The result can be fewer available seats than airlines would otherwise offer. That matters because airline ticket prices are especially sensitive to capacity.
When airlines add flights and seats faster than passenger demand grows, competition often forces fares lower. But when demand outpaces available capacity, airlines can charge more.
Aircraft shortages can therefore support higher ticket prices even when fuel becomes cheaper.
Older aircraft can also be more expensive to maintain, adding another cost pressure for carriers that must keep planes in service longer than planned.
The numbers show how airline costs are changing
Data from the U.S. Department of Transportation's Bureau of Transportation Statistics illustrate the growing importance of labor expenses.
In 2025, labor accounted for 37.5% of domestic airline operating expenses, compared with 15.2% for fuel. A year earlier, fuel accounted for 17.1% of expenses.
The airlines also reported a combined $6 billion in after-tax profits in 2025, down from $6.7 billion in 2024.
The figures suggest that even when fuel costs decline, airlines may have other financial pressures that discourage aggressive fare reductions.
Fares have continued rising despite fuel price declines
The latest airfare trends illustrate the disconnect between fuel costs and ticket prices.
According to an Associated Press report in October, the Argus U.S. Jet Fuel Index declined from $4.88 per gallon in April to $2.70 in June. Yet average U.S. airfares increased from $405 in late 2025 to $436 in the second quarter of 2026.
By August, airfares were 23% higher than a year earlier.
Holiday travelers are facing particularly steep prices. Travel booking company Hopper estimated average domestic round-trip fares of $402 for Thanksgiving and $452 for Christmas.
Airlines have also been cutting less-profitable flights and limiting capacity growth, reducing the number of seats available for purchase.
Less competition can mean higher prices
The number of airlines competing on a particular route is another major factor.
When several carriers serve the same cities, passengers can compare prices, forcing airlines to compete more aggressively. But when an airline reduces service or eliminates a route, the remaining carriers may have greater pricing power.
This is especially important at airports dominated by one or two major airlines, where travelers may have relatively few alternatives.
Airlines also use increasingly sophisticated revenue-management systems that can adjust fares based on booking patterns, anticipated demand, and remaining seat inventory.
As a result, a flight with strong bookings may continue to command high prices regardless of whether fuel costs are rising or falling.
Industry forecasts suggest little immediate relief
The Global Business Travel Association and travel management company ALTOUR forecast that travel prices will remain elevated through the end of 2026, with some moderation possible in 2027.
Their report projects a 4.7% increase in global business airfares in 2026.
But even if price increases slow next year, the organizations warn that travel costs are unlikely to return to previous levels because many of the underlying pressures have become permanent features of the industry.
The International Air Transport Association has also warned that airlines are likely to rely more heavily on additional fees for services such as checked baggage and seat selection.
Its June forecast projected that worldwide airline revenue from these ancillary services would increase 12.6% in 2026, reaching $165 billion.
What could actually bring airfares down?
While cheaper fuel alone may not produce meaningful savings, several developments could put downward pressure on ticket prices.
The most important would be a sustained decline in travel demand. If consumers cut back on vacations or business travel slows, airlines may have to discount seats to fill their planes.
Increased competition could also help. More flights, additional aircraft deliveries, and new carriers entering underserved markets would give travelers more choices.
A prolonged period of lower fuel prices would improve the chances of cheaper fares, particularly if airlines simultaneously increase capacity.
But a significant reduction in ticket prices could take months to develop, even under favorable conditions.
Travelers shouldn't assume that waiting for oil prices to decline will automatically produce a better airfare. Instead, consumers may find greater savings by comparing nearby airports, adjusting departure dates, and considering flights with connections rather than nonstop service.
Flying during less popular periods, particularly Tuesdays, Wednesdays, and Saturdays on some routes, may also offer savings, although the cheapest days vary by market.
Travelers should also compare the total cost of a trip, including baggage charges, seat selection, and other fees. A low advertised fare can become considerably more expensive once those extras are added.
For passengers booking well in advance, another strategy is to monitor fares after purchasing a ticket. Many airlines allow passengers holding eligible non-basic-economy tickets to rebook when prices decline and receive the difference as a travel credit, subject to the carrier's rules.
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