Spirit Airlines collapse, high gas prices and airfares test the limits of summer vacation spending

Higher fuel prices are testing consumers' desire to travel this summer, whether by flying or driving.

Airfares haven't been this high since May 2022, when airlines emerged from the pandemic with shortages of planes and employees to face hordes of consumers ready for “revenge trips.” Gasoline is above $4 a gallon and could approach $5 a gallon this summer, AAA warned this week.

Jet fuel prices doubled in less than three months this year after the United States and Israel attacked Iran, starting a conflict that has left a key shipping channel effectively closed.

Round-trip domestic airfares in April averaged $623, the highest in nearly four years, according to data from Airlines Reporting Corporation, which tracks travel agency ticket sales. Jet fuel is the second-largest expense for airlines after labor, and companies say they increasingly pass those costs on to customers.

Separately, airlines are also scaling back their growth plans due to higher fuel costs. Even if a route isn't cut, fewer flights on certain routes means customers will have fewer seats to choose from and, with strong demand, that could drive up prices even further.

Spirit Airlines, America's most famous low-cost airline, folded earlier this month, partly blaming jet fuel prices for its failure to emerge from nearly consecutive bankruptcies. It was the biggest collapse of a U.S. airline in decades. Subsequently, other airlines set out to attract these customers, but the airline's disappearance eliminates an important provider of low fares.

Fuel increases have set the stage for higher rates and more expensive gas station visits this summer. The start of the peak travel season, Memorial Day weekend, will be a showcase of how much travelers will pay to fly, while everything from food to clothing has become more expensive this year.

The Transportation Security Administration said it expects to screen 18.3 million people between Thursday and next Wednesday, compared to the 18.5 million it saw during a similar period last year.

Road trips won't be a bargain either. AAA predicted this week that 39.1 million people will drive at least 50 miles between Thursday and Monday, just 0.1% more compared to last Memorial Day weekend. That was the smallest growth in a decade, AAA told CNBC.

Gasoline pricing site GasBuddy forecast this week that prices across the United States will average $4.48 on Memorial Day, up from $3.14 last year, and that prices could average $4.80 through Labor Day “if the Strait of Hormuz remains closed for a significant portion of the summer.”

Leisure travel intentions in the US were slightly lower in March (82.8% compared to 83.1% in the same month a year ago), although they remain relatively high, UBS said in a note on Monday.

“We believe the year-over-year moderation in travel intentions this year was likely due to rising jet fuel and other geopolitical concerns,” wrote UBS airline analyst Atul Maheswari. He added that travel intentions are near nine-year highs.

So far, airline executives said, customers are still booking and executives are optimistic about the summer travel season. They have also said they expect a boost from the FIFA World Cup, which will be held in June and July in the United States, Canada and Mexico, and from major concerts such as Harry Styles' residencies in Amsterdam and London this summer.

united airlines said it expects to transport 53 million travelers between June and August, 3 million more people than last year. american airlines has forecast 75 million customers between May 21 and September 8, after Labor Day, surpassing its previous record, in 2019.

Airlines have been cutting their schedules and eliminating unprofitable or less profitable routes, but have been eager to fill the gaps after Spirit's collapse.

Travelers can still find deals if they are flexible, said Kyle Potter, who runs the website Thrifty Traveler. Recommended to use tools such as the “Explorer” tool in Google Flights that allows users to search for destinations by trip length and month in a map view.

He also suggested that travelers consider traveling on Tuesdays or Wednesdays, when fares and traffic are typically lower.

“That, in many cases, can save you hundreds of dollars per ticket and multiply that for a family of four,” he said.

He had a simple message for travelers sitting on piles of frequent flyer miles.

“Now is the time to use your miles or your credit card points or both,” he said, warning that miles can end up devalued. “What are you waiting for? I think a lot of people accumulate their miles because they want to go to Europe in 2027.”

-CNBC Brewing Contessa contributed to this report.