Southwest CEO: Rising Fares Not Deterring U.S. Consumers From Flying

A series of air fare increases in the U.S.—spurred by higher fuel prices associated with the Iran war—have not dampened passenger demand, enabling U.S. carriers to weather increased fuel costs, according to Southwest Airlines CEO Bob Jordan.

“The industry with fuel up has had seven consecutive fare increases since Feb. 1,” Jordan said May 28 at the Bernstein Strategic Decisions Conference. “Southwest has participated in all of those. That’s the most [consecutive fare increases] that I could remember in my 38 years in the industry. But with fares up that much there’s been no drop off in demand at all, no indication that the consumer is elastic in this fare environment.”

According to Airlines for America’s tracking of average daily jet fuel prices for airports in Chicago, Houston, Los Angeles and New York, jet fuel prices spiked at $4.88 per gallon on April 2, but have dropped steadily since, hitting $3.22 per gallon on May 29. That is still elevated from $2.42 in late February, but on par with $3.24 on March 3.

“One of the questions, of course, is how sticky will these [fare] increases be,” Jordan said. “We and our competitors are all focused on ratable production of results, steady production of results, sustainable margins, and so I do think that produces a backdrop where we’ll certainly not attempt to give some of these fare increases back.”

Jordan said consumer resilience is seen across “leisure [and] business [passengers], across geographies, across all points in the booking curve. The consumer remains very strong despite this rise in fares, so I’m becoming increasingly bullish that we will be able to cover these fuel increases with revenue increases.”

Spirit Airlines’ demise—the ULCC shut down on May 2—also puts less pressure on fares, Jordan said. “Obviously, you hate to see somebody go out of business, but with Spirit out of business, I think that helps that [fare] environment,” he said. “So, I do think ... when [the price of jet] fuel drops, [U.S. airlines will] retain the revenue and yield increases that we’ve seen. The bottom line for Southwest Airlines is demand is really strong.”