The K-shaped economy is helping keep the airline industry afloat

The cost of a plane ticket jumped 25% over the past year, but U.S. summer travel hasn't slowed down.

The cost of plane tickets has soared over the past year, but consumer demand has yet to slow down during this summer travel season.

Wednesday's consumer-price index report showed that airfares jumped 25.5% year over year in July, largely due to carriers passing along the rising cost of fuel to consumers.

Despite the rising costs to fly, top U.S. airlines reported strong demand in their second-quarter earnings results, and the number of travelers passing through airport security has remained generally consistent since the start of 2026, according to the Transportation Security Administration.

The airline industry's resilience can be attributed in part to what's known as the K-shaped economy, as thriving high-income travelers book seats in premium cabins with four-figure price tags while middle- and lower-income travelers struggle to afford a seat in economy class. Some price-sensitive consumers who are traveling this summer likely panic-bought their tickets when conflict between the U.S. and Iran began to shake global oil markets in late February, travel experts say.

The past year of travel has been defined by relentless sticker shock. Airlines began adding fuel surcharges and cutting routes in early spring to offset rising jet fuel prices; three major carriers increased bag fees; United Airlines $(UAL)$ started reserving its best perks for its credit-card holders; and the collapse of Spirit Airlines did away with one of the few chances Americans had to score flights under $100. With many households struggling to afford gas, groceries, housing and healthcare, it's unclear how much more airfare inflation they can take.

"When we start to get into the reporting for September, October, November, that's really where the true test is going to come in to see if airlines can actually hold these prices that they're demanding," said Katy Nastro, spokesperson for the travel site Going.

Some small signs point to cracks in the industry's - and passengers' - resilience. In June, passenger demand fell 1.7% globally, or 0.6% excluding the Middle East, according to the International Air Transport Association, although Nastro said it's difficult to draw inferences about U.S. trends from global data. United reported growth in its basic economy class, which she said could be a signal that consumers are pulling back on their travel budgets.

For now, many people just aren't ready to give up their summer trips. Summer vacations are non-negotiable, say 60% of Americans, with 41% scaling back their plans to make the math work, according to a 2026 survey from the luggage-shipping service LugLess. Some are offsetting costs by avoiding baggage fees, with 21% of respondents saying they switched to airlines that include baggage in fares and 29% opting to only bring a carry-on to avoid bag fees.

Alston Causey, a vice president at the travel agency Travelmation, also said he's seeing his clients get savvy with their itineraries as a way to trim their budgets. More clients are opting to use miles to cover airfare in order to free up cash for the rest of the trip, he said, and some are looking at airfares before even deciding where to go, letting the cheapest routes determine their vacation destination.

"People are still traveling," Causey said. "They're just flexing the trip rather than not going on the trip."

Even as vacationers become more thrifty, inflation is still contributing to bigger trip budgets this year. The average budget for major summer trips was $4,049 - 17% higher than in 2025, according to Deloitte's 2026 summer travel survey.

Heading into the fall, travelers can find some relief in hotel prices, which fell 3.3% in July after a 2.8% decline in June, the biggest back-to-back drop since the pandemic. It's unclear if the decline can be attributed to fewer Americans traveling: Foreigners leaving the U.S. after the FIFA World Cup could have contributed to lower prices as well.

When it comes to airfares, consumers might have to brace for turbulence for a little longer. Sustained demand signals to airlines that passengers are willing to cough up the extra cash to secure a seat, said Peter Vlitas, executive vice president of partner relations for international travel brand Internova Travel Group.

"I think we're going to see these fares for a long, long time," Vlitas said. "Well into 2027, and maybe into 2028."

Need advice on a money-related issue? MarketWatch's Dollar Signs advice column is here for you. You can submit questions anonymously here.

-Genna Contino