CPI: Airfares spike 27% in May on jet fuel costs (JETS:NYSEARCA)

May consumer prices rose 4.2% from a year earlier, the Bureau of Labor Statistics said Tuesday, with airfares surging 26.7% – the largest monthly gain since April 2021. The jump reflected higher jet fuel costs tied to rising crude oil prices and supply constraints from OPEC+ cuts and Middle East tensions, the report noted.

The airfare spike is a direct pass-through of input costs. Jet fuel prices have climbed with crude on supply concerns. Airlines have limited ability to absorb those costs without raising fares, and the May data shows they are doing so.

For the U.S. Global Jets ETF (JETS), the CPI report adds a new risk. The fund holds a basket of carriers including Delta Air Lines, United Airlines, and Southwest Airlines. Higher fuel costs compress margins unless revenue per seat keeps pace. The May airfare data suggests ticket prices can rise. The question is demand elasticity. If consumers cut back on travel spending, carriers face a double hit: higher costs and lower yields.

The 26.7% monthly increase is the largest since April 2021, when the economy was reopening from pandemic lockdowns. That earlier spike was driven by demand recovery. This time, the driver is cost-push from fuel, which may be harder for carriers to manage if demand softens.

The Federal Reserve meets June 11-12. A CPI print above consensus reduces the chance of a near-term rate cut. Tighter monetary policy raises airlines' borrowing costs and risks slowing economic growth, which in turn weighs on travel demand.

The next data point is the May Producer Price Index, due June 14. It will show wholesale cost trends for jet fuel and other airline inputs. Traders watching the JETS ETF will also look at weekly TSA throughput numbers for a demand check.