Avelo CEO Warns Airfares May Rise on Jet Fuel Price Spikes

Fuel Price Volatility and Operating Costs

Avelo Airlines founder and CEO Andrew Levy has signaled that the carrier may be forced to raise base fares as surging jet fuel prices reach "uncomfortably high" levels. The recent cost volatility, driven by geopolitical tensions in the Middle East, has created immediate financial pressure for the ultra-low-cost carrier (ULCC). According to the International Air Transport Association, the global average jet fuel price rose 9% from the previous week to $171.01 per barrel last week. This sharp increase reflects mounting supply concerns as shipping route disruptions impact global energy markets.

Levy, who previously co-founded Allegiant Air and served as CFO for United Airlines, noted that while the airline has navigated fuel fluctuations earlier this year, the current environment necessitates a shift in pricing strategy. "At the end of the day, we have to be able to pass these costs onto our customers," Levy stated. This sentiment aligns with broader industry warnings, including comments from Ryanair CEO Michael O'Leary, who recently suggested that airfares could rise "significantly" if current oil price levels persist.

Impact on the Leisure Traveler

For Avelo Airlines, which launched in April 2021, the primary customer base consists of "personal travelers"—individuals funding their own trips for family visits or vacations. Levy acknowledged that this demographic is particularly sensitive to price shifts. "Everybody has a price at which they're going to travel either more often or less often, and so we have to be mindful of that," he said. While consumer advocacy groups often argue that base fares do not always decrease when fuel costs stabilize, Avelo maintains that its focus remains on balancing cost-recovery needs with the price sensitivity of its passengers.

Despite the economic headwinds, demand for Avelo’s services remained resilient throughout the summer season. The airline continues to execute its growth strategy by focusing on secondary airports, which Levy argues offer a more convenient and less stressful experience compared to larger, congested hubs. The carrier currently serves more than 35 destinations and has extended its booking schedule through April 2027.

Fleet Strategy and Expansion

Looking ahead, Avelo is preparing to expand its network with the launch of commercial service from McKinney National Airport (DTX) in Texas, scheduled for November 11, 2026. The airline plans to continue growing its fleet of Boeing 737 aircraft in the interim. However, the carrier's transition to newer technology has encountered a timeline adjustment, with the delivery of its first Embraer E195-E2 jets now slated to begin in 2028 rather than 2027. This delay impacts the manufacturer's near-term delivery schedule while requiring Avelo to manage its existing fleet capacity through the current fuel cycle.

Historical Precedents in Fuel Pricing

The current market situation mirrors the volatility observed during the early 2022 period following the Russian invasion of Ukraine. During that event, jet fuel prices spiked to levels exceeding $170 per barrel, forcing airlines globally to implement fuel surcharges, trim unprofitable routes, and increase base fares to offset operational cost hikes. The current situation suggests a similar trajectory where geopolitical instability serves as the primary driver for rapid, systemic cost increases across the aviation sector.

Why Rising Fuel Costs Matter to ULCCs

For ultra-low-cost carriers, fuel represents one of the most significant and uncontrollable variable expenses, directly impacting the thin margins that characterize the business model. Because these airlines rely on low base fares to stimulate demand, any sustained increase in fuel prices forces a difficult trade-off between market share and profitability. As Avelo and its peers navigate this period, the ability to pass costs to the consumer will be tested against the price elasticity of the leisure travel market, shaping the financial performance of the sector through the remainder of the year and into 2027.