United Airlines projects $6 billion surge in annual fuel costs

United Airlines expects its annual jet fuel costs to soar by $6 billion this year, citing Tuesday's crude oil prices as the basis for the projection. Jet fuel, the second-largest expense for airlines after labor, has seen significant price hikes.

In its second-quarter earnings release, United reported already spending an extra $2.3 billion on fuel during that period. This represents an 84% increase compared to the same quarter last year. The airline's financial performance has been bolstered by strong consumer demand for air travel, which has enabled it to pass on some of the increased costs to customers through higher fares.

Rival Delta Air Lines echoed similar sentiments, reporting robust demand despite raising fares to counteract rising fuel expenses. Delta CEO Ed Bastian told CNBC that airfares are a "function of supply and demand," with demand remaining strong and supply in balance. Delta also experienced a significant spike in fuel costs, spending $4.4 billion in the second quarter, up 77% year-over-year.

The price of jet fuel reached a record high of nearly $5 per gallon in April amid ongoing geopolitical tensions, though it had decreased to $3.64 per gallon by Tuesday, according to the Argus U.S. Jet Fuel Index. Other major U.S. carriers are expected to release their earnings later this month. Airlines are responding to high fuel costs through various strategies, including temporarily cutting less efficient routes, adding fuel surcharges, and increasing checked baggage fees.

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Airfares are a function of supply and demand. The demand set is really strong and the supply is in balance.