Impact of jet fuel prices on travel

[0:00] Let's start with a group of budget airlines seeking a $2.5 billion jet fuel bailout from [0:05] the Trump administration, our go-to for everything economy, Elizabeth Schulze, here in our New York [0:10] newsroom. It is good to see you, Elizabeth. Okay, so we can't talk about this. Always good to see [0:15] you. We can't talk about jet fuel without talking about the pain at the pump. Yeah, and look, it's [0:22] getting even worse, right? When you look at those gas prices, we're now at about $4.26 a gallon on [0:27] the national average. We've seen a pretty significant increase in gas just in the last [0:31] couple of days. And as we know, this is all driven by the price of oil, which is now back above $100 a [0:37] barrel, of course, because of what we've been seeing with Iran. And look at that change in gas [0:41] prices, Gio. It's been so notable. A week ago, just about $4. And a year ago, $3. Before the Iran war, [0:48] we were just under $3. So this has been such a big spike in a short amount of time, and it's having [0:52] these pretty significant ripple effects. 20-cent jump just within the past week is unbelievable. [0:58] So how can people save on gas right now? Yeah, and I know you've been doing a lot of reporting [1:02] on this, too. You want to find those ways where even a couple cents a gallon can make a big [1:06] difference. So the first thing you've got to do, look at your local gas station and see what [1:09] rewards and loyalty programs they have. Usually it's free to join. It'll save you a couple cents [1:14] to fill up. Depending on the day, the time, you can get a better deal. And you just have to plan [1:19] around when you go a little bit more. Sites like GasBuddy and AAA, you can just look at where you [1:24] are and see, you know, maybe it's a little two-minute extra drive. They will find a station [1:30] that can be, you know, a lower average than where you are now. So just check that. And then also check [1:35] your grocery stores. They can often have deals where if you're a member at the grocery store, [1:38] also a lot of time those programs free, they'll give you a discount on gas. Similar deals going on, [1:43] Gio, with Amazon memberships, Walmart memberships. A lot of these are kind of hidden perks for [1:47] memberships you might already pay for. So don't leave any money on the table there when it comes [1:50] to gas prices. Sure to look for your credit card terms as well, because they have those there as [1:55] well. Okay, so let's get back to the jet fuel crisis. Budget airlines are asking the government [1:59] to bail them out. So how did we get here? Yeah, and this has been a really tough road for a lot [2:05] of these budget airlines, especially because they have tighter margins. As you know, they've been [2:10] really hit hard by the spike in jet fuel costs. So we've seen jet fuel now double since the start of the [2:16] war. So jet fuel is up a lot more even than gas or diesel. And that is really hitting these airlines, [2:22] especially some of those that have already been having trouble financially. When you look at a [2:26] company like Spirit Airlines, where we know they are actually seeking a bailout from the Trump [2:30] administration now, and we know there's a group of budget carriers that kind of want to get this cash [2:34] infusion from the administration. They say that they, you know, they were on a path toward [2:39] restructuring. They were working to get things better. Their budget, their kind of business model had [2:43] already been in doubt in a lot of ways, Gio, because we see some of those major airlines [2:47] launch threats to them with basic tickets that pretty much undermines a lot of what those budget [2:52] airlines have tried to stand for. And what they're saying is they already kind of were having these [2:56] issues. The higher jet fuel costs have made those issues a lot worse. And obviously this has a lot to [3:01] do with the war with Iran. Of course. I mean, that's what it all comes down to, right? So you have the [3:06] reality that the war has caused this unprecedented backlog in oil shipping. And a lot of jet fuel, Gio, [3:12] is actually shipped through the straight up. Plus you've got a lot of oil facilities in the Middle [3:18] East actually making jet fuel. And I think it's kind of helpful just to think about a barrel of oil. [3:22] When you look at just like a, just imagine what would, you know, be a container of oil [3:25] storing that about 20% of that barrel can go towards gasoline, 14% about would go towards diesel [3:32] and a much smaller, about 5% toward jet fuel. So what that basically tells you is that you need a lot [3:38] more jet fuel to get what you need to get these planes moving. And when you have this supply [3:43] shortage like we have right now, that's why you're seeing those prices for jet fuel up even more, [3:47] because you need even more to make up for what we're lacking. And that's why it's going to take [3:51] probably some time to see those prices come down anywhere close to where they were before the [3:55] start of the war. All right, Elizabeth Schulze, thanks for breaking that down for us. We appreciate [3:59] it. Let's go ahead and bring in travel expert Katie Nastro now from going.com on the impact that this [4:04] all could have on your travel plans. Okay, Katie, so what does the jet fuel crisis mean for people [4:09] and their travel plans? Yeah, Gio, unfortunately, we're seeing the impacts from the straight-of-home news [4:16] being closed and these higher jet fuel prices that are impacting airlines has now trickled down onto [4:22] higher fares for consumers. The biggest, biggest mistake really that people can make is waiting to [4:29] book their flights for any immediate travel, but also specifically for summer travel. Because [4:36] historically, summer travel is very expensive to begin with. But this year, we're seeing these [4:42] fares stay really sticky and really elevated. And there's no sign that it's going to deflate [4:48] anytime soon. Yeah, no sign of easing up just yet. So why are smaller carriers compared to the larger [4:53] ones being hit harder by this crisis? Yeah, Gio, you know, look, these low-cost carriers, they operate [5:00] on really thin margins, like Elizabeth had explained earlier. And with a higher jet fuel cost, you know, [5:07] jet fuel is one of the second biggest costs for airlines. And for some of these smaller carriers, [5:12] if they're forecasting, you know, X to be their cost for the year, and now X goes out the window and [5:18] it's much higher, those margins get even thinner. And it's really hard for them to compete amongst [5:25] these bigger carriers with bigger networks, bigger resources. You know, even the JetBlue CEO [5:31] has stated that headwinds are going to be across the market for these smaller carriers because they [5:38] just don't have the big budgets and the big resources that some of these larger carriers do. [5:43] Yeah, that's what a lot of people don't realize. Okay, so what would a bailout from the Trump [5:46] administration mean long term for these airlines? And most importantly, I think for a lot of us, [5:51] the customers? Yeah, gosh, you know, we've seen the government step in before during 9-11, [5:57] as well as COVID. But those were moments when demand was totally bottomed out. You know, [6:03] they really needed a kickstart to the system. But some of these larger carriers are stating that [6:08] demand is looking great. OTAs suggesting that it's looking pretty healthy. And so if the demand is [6:14] pretty high, they can command these higher prices. And unfortunately for us, the consumer, [6:20] that means that we are going to continue to pay those higher prices if we are looking to travel. [6:26] And, you know, looking specifically at a low-cost carrier like Spirit, if some of these low-cost [6:32] carriers cease to exist, that also puts immense pressure on us as the travelers because there's less [6:39] competition, less options. So, you know, it's unfortunate that in the immediate future, [6:45] it's looking like there are turbulent times ahead for the traveler. The traveler is really going to [6:50] pay in the way of higher fares or in the way of paying through our tax dollars. [6:56] Yeah, that competition is really, really important. Katie Nastro from going.com, [7:00] thank you. Good to have all your expert advice here. Appreciate it.