Budget Airlines Seek $2.5 Billion in U.S. Aid as Jet Fuel Costs Surge from Iran Conflict

Low-cost U.S. airlines have asked the federal government for $2.5 billion in assistance to cover elevated jet fuel costs stemming from the ongoing U.S.-Israeli military actions against Iran. The request, made by executives from carriers including Frontier and Avelo, assumes fuel prices will average above $4 per gallon for the rest of the year.

Jet fuel prices averaged $4.19 per gallon on Friday, nearly double the pre-conflict level of less than $2.50, according to Argus Media. A trade group for budget airlines linked the cost surge to disruptions in the Strait of Hormuz, which has been effectively closed to shipping since March.

This has forced airlines to seek alternative fuel sources and reroute flights, particularly long-haul routes over Asia.

Executives from Frontier and Avelo met with Transportation Secretary Sean Duffy and Federal Aviation Administration chief Bryan Bedford last Tuesday to discuss the aid plan. The proposed package would involve government warrants convertible to equity stakes, similar to past bailouts.

The White House has not yet responded to the request, but discussions are ongoing. Earlier this month, budget airlines including Spirit, Frontier, and Avelo urged Congress to suspend certain ticket taxes to offset about one-third of the added fuel costs.

Without relief, they warned, ticket prices would rise further, impacting consumers. Spirit Airlines, already in bankruptcy restructuring, had projected fuel costs of $2.24 per gallon for 2026 in a March filing with the Securities and Exchange Commission, far below current levels.

Long-haul routes have seen sharp price hikes, with flights from London to Melbourne up 76% and to Hong Kong up 72% compared to last year, according to consultancy Teneo. Russian diesel tankers originally bound for Brazil have diverted toward Egypt via the Suez Canal to chase higher spot prices, as sellers adapt to the EU's 2023 ban on Russian oil products.