Air travel may soon become costlier for passengers. A recent report by McKinsey suggests that flight ticket prices could increase by as much as 25% in the coming months.
According to the report, rising jet fuel prices, refinery shortages, and ongoing geopolitical tensions are putting pressure on airlines worldwide.
As airlines face higher operating costs, passengers may eventually have to pay more for their tickets.
Why Are Jet Fuel Prices Rising?
The report says demand for jet fuel has been increasing even before the busy summer travel season, while fuel inventories continue to fall.
At the same time, crude oil prices have risen, and supplies from some major oil-exporting countries have become limited. This has pushed jet fuel prices higher.
The Gulf region and key Asian exporters together provide around 40% of the world’s jet fuel. However, refinery production in these regions has slowed, creating additional pressure on supply.
What Is the ‘Crack Spread’?
The difference between the price of crude oil and the price of refined fuels such as petrol, diesel, and jet fuel is known as the “crack spread.”
Historically, the crack spread for jet fuel has usually remained below $20 per barrel. However, McKinsey expects it to rise above $50 per barrel on average by 2026.
A higher crack spread generally means fuel production is becoming more expensive, which can eventually lead to higher fuel prices for airlines.
Supply Challenges May Continue
The report also notes that countries such as India, China, and South Korea have partially restricted oil exports following recent geopolitical tensions.
Although other exporters may help fill some of the gap, they are unlikely to completely solve the shortage. Many refineries around the world were already operating near full capacity before the current situation, making it difficult to quickly increase production.
While fuel prices could ease if tanker traffic through the Strait of Hormuz improves, experts believe prices may remain volatile until fuel inventories are rebuilt and supply chains return to normal.
How Could This Affect Flight Tickets?
Fuel is one of the biggest expenses for airlines and accounts for nearly 30% of the total cost of an air ticket.
If jet fuel prices continue to rise, airlines may pass a large part of the additional cost on to passengers. As a result, airfares could increase by around 20% to 25%.
For example, a round-trip ticket from Delhi to Dubai currently costs around ₹25,000 to ₹28,000 per person.
If a group of four people spends about ₹1 lakh on tickets today, a 25% fare increase could push that cost to around ₹1.25 lakh.
Travelers planning international or domestic trips in the coming months may need to prepare for higher ticket prices if fuel costs remain elevated.
