Budget airlines in Mexico and US ground flights as fuel costs spiral out of control

Budget airlines in Mexico and the US are struggling as jet fuel prices climb sharply. The surge follows the Middle East conflict, which has pushed operating costs to unsustainable levels for some carriers. Two Mexican low-cost airlines have already suspended flights, while others adjust fares to cope. Jet fuel prices in Mexico jumped by 101% between January and March 2023. This spike has hit low-cost carriers hard, as fuel makes up 35% to 40% of their total operating expenses. For every 10-cent rise in fuel price per gallon, an airline’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) fall by one percentage point.

Magnicharters became the first Mexican airline to halt operations, with analysts blaming unaffordable fuel costs. Shortly after, Spirit Airlines in the US also grounded flights, citing a liquidity crisis tied to soaring oil prices. Both carriers relied on slim profit margins, leaving them exposed to price shocks.

Volaris and Viva Aerobus, two of Mexico’s biggest budget airlines, now face intense pressure. Their low-fare models depend on keeping costs minimal, but rising fuel expenses threaten profitability. In response, Volaris announced plans to raise ticket prices and add more flights on international routes. Meanwhile, Aeroméxico is focusing on travellers willing to pay higher fares when fuel costs push prices up. The crisis highlights the vulnerability of budget airlines to fuel price swings. With two Mexican carriers already suspending flights, others are raising fares or adjusting routes to survive. The situation leaves cost-conscious travellers with fewer affordable options in the short term.