The energy headwind to domestic air travel demand

Since the U.S. and Israel fired the opening salvo in their war on Iran, oil prices have soared, in recent days breaching the psychologically significant $100 per barrel level.

The war has lasted longer than many estimated at the onset, and upward pressure on energy prices has seeped into other areas of the economy, including agriculture, manufacturing and consumer goods.

Commercial airlines belong at the top of that list.

While the S&P 1500 Airlines Index .SPCOMAIR remains up more than 4% year-to-date, that's in spite of a precipitous 17% drop so far this quarter. The broader market .SPX has advanced well over 12% so far this year, triple the SPCOMAIR's advance over the same time frame.

The SPCOMAIR is up 2.6% on Monday, while WTI crude CLc1 is off around 5%.

What's more, last month's CPI report showed airfares surged 2.7% in August from the month prior, and have risen by a whopping 23.4% year-on-year.

So has that affected demand? Yes, it appears so.

The press release accompanying the Conference Board's most recent consumer confidence report says consumers anticipated spending less on many travel-related activities within the next six months, including air travel.

A look at the Transportation Security Administration (TSA) data shows that over the seven days ended September 20, an average of 2,397,613 travelers emptied their pockets into plastic bins at airport security checkpoints. That's down about 3.2% from last year's corresponding seven-day average, and off 1.7% from the same stretch of days in 2024.