We no longer support this browser. Using a supported browser will provide a better experience.

Please update your browser.

Close browser message

As a global leader, we deliver strategic advice and solutions, including capital raising, risk management, and trade finance services to corporations, institutions and governments.

Learn more about our solutions:


Serving the world's largest corporate clients and institutional investors, we support the entire investment cycle with market-leading research, analytics, execution and investor services.

Learn more about our solutions:


We are a leader in investment management, dedicating to creating a strategic advantage for institutions by connecting clients with J.P. Morgan investment professionals globally.

Learn more about our solutions:


Our financial advisors create solutions addressing strategic investment approaches, professional portfolio management and a broad range of wealth management services.

Learn more about our solutions:


Leverages cutting-edge technologies and innovative tools to bring clients industry-leading analysis and investment advice.

Learn more:


The latest news and announcements.

Learn more:


For company information and brand assets for editorial use.

Learn more:


The latest news and announcements.

Learn more:


In a fast-moving and increasingly complex global economy, our success depends on how faithfully we adhere to our core principles: delivering exceptional client service; acting with integrity and responsibility; and supporting the growth of our employees.

Learn more:


J.P. Morgan is a global leader in financial services, offering solutions to the world's most important corporations, governments and institutions in more than 100 countries. As announced in early 2018, JPMorgan Chase will deploy $1.75 billion in philanthropic capital around the world by 2023. We also lead volunteer service activities for employees in local communities by utilizing our many resources, including those that stem from access to capital, economies of scale, global reach and expertise.

Learn more:


With over 50,000 technologists across 21 Global Technology Centers, globally, we design, build and deploy technology that enable solutions that are transforming the financial services industry and beyond.

Learn more:


Technology Banner

For general inquiries regarding JPMorgan Chase & Co. or other lines of business, please call +1 212 270 6000.

Learn more:


For general inquiries regarding JPMorgan Chase & Co. or other lines of business, please call +1 212 270 6000.

Learn more:


Will Higher

Oil Prices

Affect Airlines?

With oil prices reaching their highest levels since 2014, airline profits are being squeezed. The J.P. Morgan Research team takes a look at what this means for airfares this year and in 2019.

July 18, 2018

Created with Sketch.

scroll to view the report

dotted-line_1 Created with Sketch.

Commodities are the best performing asset class this year, gaining around 6% in the first half of 2018 as measured by commodities indices, with oil driving most of those gains. This spike in the oil price means airlines are forced to pay more for fuel and this cost is usually passed onto passengers through fare increases and fewer cheap seats. J.P. Morgan Head of Oil Market Research, Abhishek Deshpande and Lead U.S. Airlines and Aircraft Leasing Equity Analyst, Jamie Baker share their views on the outlook for the oil price and how this will impact the cost of air travel for the rest of the year and into 2019.

Why Have Oil Prices Risen?

Oil has had a volatile year so far, with global benchmark Brent crude hitting a three and a half year high of $80.50 in May. It has fluctuated since then in the run up to and aftermath of the Organization of the Petroleum Exporting Countries (OPEC) meeting in late June. Renewed sanctions on Iranian oil exports, the potential of a U.S.-China trade war and comments from President Trump pressuring OPEC to boost supply all mean volatility will likely remain high.


  • An increase in geopolitical instability in
    key petroleum exporting countries such as Libya
  • Sanctions risks in Iran, Russia, Venezuela
  • Reduction in OPEC spare capacity due to supply disruptions and lack of investments
bull Created with Sketch.


  • Higher than expected growth in non-OPEC supply driven by U.S.
  • A macroeconomic growth shock resulting in much weaker demand growth
  • Trade tariffs and protectionist policies between U.S. & rest of world impacting global growth; China imposing tariffs on U.S. energy products
bear Created with Sketch.
dotted-line_body Created with Sketch.

How Does This Affect Airlines?

price Created with Sketch.

Jet fuel prices in the
U.S. are up around
compared to the same
time last year.

Higher oil prices result in higher jet fuel and diesel prices and as fuel is one of the key expenses for airlines, a spike in the cost of fuel gets passed on to consumers through higher air fares. Jet fuel prices in the U.S. are up around 30% compared to the same time last year, which will also weigh on the earnings prospects of airlines. “Management teams attempt to recapture higher input costs from customers through revenue initiatives – which usually mean price increases for customers,” said J.P. Morgan Lead U.S. Airlines and Aircraft Leasing Equity Analyst, Jamie Baker. This tends to hit American airlines the hardest because unlike European and Asian airlines,
most of them do not hedge or have insurance in place for higher oil prices.

Will This Impact the Cost of Travel?

As travel is a planned event, most summer bookings have already been made prior to fuel’s most recent run-up. There’s not much airlines can do to recoup the higher costs in the immediate term, apart from adjusting the pricing on remaining seats – so procrastinators will likely feel the spike in fuel prices reflected in their summer airfares. Post Labor Day, travelers should expect to see the industry start to recalibrate for higher fuel through the form of higher ticket prices and also by curtailing capacity.

“For corporate travel, which is more of a mid-to-late September event, business travelers can expect both higher ticket prices and potentially slimmed down schedules unless fuel prices very quickly recede,” said Baker.

travel Created with Sketch.

Labor Day,
travelers should expect to see the industry start to recalibrate for higher fuel through the form of higher ticket prices.

As airlines reduce the overall number of seats going on sale, the remaining seats will likely be allocated towards higher fares, meaning customers looking for cheap, last minute seats will also be affected. By 2019, higher fuel will be incorporated into higher ticket prices more generally. U.S. passenger airlines are prohibited by law from charging formal fuel surcharges for domestic travel, but enjoy greater flexibility internationally to apply fuel surcharges, so this will be reflected in long haul flights.

“We aren’t expecting huge fare increases. Current gas prices are manageable but fuel is more expensive than this time last year. If one were to engage in identical travel plans in 2019 compared to 2018, I think it’s reasonable to expect that your airfare component would likely be around 10% higher. If you’re flying long haul or as a family, that could be a relatively meaningful increase,” Baker added.

What’s the Outlook for the Oil Price?

The J.P. Morgan central scenario forecasts Brent at $72 per barrel (bbl) in the third quarter of 2018 and $63/bbl in the fourth quarter on average, but there is a positive risk bias largely based on the outlook for Iranian oil exports.

Source: ICE, NYMEX, Bloomberg, J.P. Morgan Commodities Research, As of June 8, 2018

Source: ICE, NYMEX, Bloomberg, J.P. Morgan Commodities Research, As of June 8, 2018

“Geopolitical tensions and lingering risks of large supply disruptions led by U.S. sanctions on Iran add an upward risk bias to oil prices in the months ahead meaning oil prices could be pushed to the high case scenario ($77 bbl) in the near term,” said J.P. Morgan’s Abhishek Deshpande. At the same time, if oil prices remain high ahead of the U.S. mid-term elections in November, there is an increasing risk that the U.S., or its OECD allies, could respond by releasing strategic petroleum reserves to ease price pressure. Sustained higher oil prices would also be negative for oil products demand growth in the short term.

Head to J.P. Morgan Markets for more on airlines and the oil market

This communication is provided for information purposes only. Please read J.P. Morgan research reports related to its contents for more information, including important disclosures. JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively, J.P. Morgan) normally make a market and trade as principal in securities, other financial products and other asset classes that may be discussed in this communication.

This communication has been prepared based upon information, including market prices, data and other information, from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy except with respect to any disclosures relative to J.P. Morgan and/or its affiliates and an analyst's involvement with any company (or security, other financial product or other asset class) that may be the subject of this communication. Any opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This communication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. J.P. Morgan Research does not provide individually tailored investment advice. Any opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. You must make your own independent decisions regarding any securities, financial instruments or strategies mentioned or related to the information herein. Periodic updates may be provided on companies, issuers or industries based on specific developments or announcements, market conditions or any other publicly available information. However, J.P. Morgan may be restricted from updating information contained in this communication for regulatory or other reasons. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

This communication may not be redistributed or retransmitted, in whole or in part, or in any form or manner, without the express written consent of J.P. Morgan. Any unauthorized use or disclosure is prohibited. Receipt and review of this information constitutes your agreement not to redistribute or retransmit the contents and information contained in this communication without first obtaining express permission from an authorized officer of J.P. Morgan.