Airlines are absorbing up to 50% of surging jet fuel costs. Alaska is still betting on premium international flights

Despite rising fuel costs, Alaska Airlines is pushing ahead with its plan to attract more premium passengers as it celebrated the launch of its newest route atop a London skyscraper on Thursday evening.

The Seattle-to-London service is part of a rapid European expansion, following last month's launch of Alaska's first-ever transatlantic route, to Rome. A third service, to Iceland, is set to begin next week.

But it comes at a cautious time for the industry since the Iran war sent jet fuel prices skyrocketing.

"You've seen a very significant drive to get airfares up," Andrew Harrison, Alaska's chief commercial officer, told Business Insider. "I think on average, most carriers, even what we're selling today, are still only covering 50, 60, 70% of the increased cost of fuel."

While most European airlines hedge against fuel costs using financial derivatives, most US carriers do not, leaving them more exposed to the surge in prices. Fuel is typically an airline's second-highest expenditure, after labor.

United Airlines plans to "fully offset the increase in fuel prices," but that would require an extra 8.5 percentage points of revenue for each seat it flies, CEO Scott Kirby said in March.

Even with higher airfares and checked bag fees, Harrison's comments show how fuel costs are still eating into most airlines' profits.

"What we tell ourselves at Alaska is just control what we can control. We are an industry that faces crises all the time. If it's not one thing, it's another," Harrison told Business Insider.

"So we just feel actually very good about our expansion and what we're doing here. In fact, it gives us even greater wind in our sails to continue and work hard during these difficult times."

Jet fuel prices change summer vacation habits

Despite rising prices, many people are still keen to fly — especially those rich enough to fly in premium cabins, which are particularly profitable for airlines.

Around 30% of people won't change their summer travel plans due to rising gas prices, according to a Bank of America survey of 4,000 people conducted in April. Plus, the survey found middle- and higher-income households are seeing stronger travel spending.

Alaska is leaning into the trend with new international business-class suites, including sliding privacy doors and lie-flat beds. By 2028, it also plans to introduce a premium economy cabin on its long-haul widebody aircraft, like the Boeing 787 operating the London route.

Starlink's high-speed in-flight WiFi also helps attract premium travelers. Alaska has equipped some planes with Starlink, but it isn't yet certified for the 787. Harrison said the airline expects it to be ready in the fall.

Alaska has expanded to long-haul transatlantic flights thanks to its acquisition of Hawaiian Airlines, which had a fleet and order book of 787s. It's timely, given the popularity of Europe with American travelers.

The Bank of America survey found Europe remained the most attractive location for vacationers this year. Compared to 2025, it's become at least 10% more popular with middle- and higher-income households — but less popular with lower-income households, according to the survey.

On the other hand, this means strong competition. British Airways and Delta Air Lines already fly between Seattle and London, although Virgin Atlantic is suspending its route for the winter season.

Harrison pointed to Alaska's "state-of-the-art aircraft" on the route, manufactured in the last 12 months, as well as its Seattle hub with 105 destinations.

To bypass Heathrow's capacity constraints, Alaska is leasing its slot at the London airport from American Airlines, a fellow member of the Oneworld alliance.

"Working together with our Oneworld partners has just given us amazing opportunity in what we know is a very highly congested and competitive airport," Harrison said.

BA is also a Oneworld member, so Alaska customers can connect on its flights to other destinations on the continent.

Surging fuel prices have made it a testing time for aviation, but Alaska isn't too concerned, backing its international expansion.

It's going to build a new foundation for growth, long term, for the airline," Harrison said. "These are large investments, don't get me wrong, but we're building the company for the future, we're building the brand for the future, and this is one area where we're going to just keep going."

Alaska is aiming for 12 international destinations out of Seattle by 2030, and plans to announce more later this year.