Alaska pushes premium expansion as jet fuel surges

Alaska Airlines is opening new long-haul routes across Europe while acknowledging that the industry is still only covering a fraction of the increase in jet fuel costs. As Iran-war linked prices strain airlines that don’t hedge, Alaska is betting that premium

Alaska Airlines celebrated the launch of its new Seattle-to-London service from atop a London skyscraper on Thursday evening, even as the numbers behind the flight felt harsher than they have in years.

The timing is difficult for aviation. Jet fuel costs have surged after the Iran war sent prices skyrocketing. squeezing airline margins just as carriers push for growth. Alaska’s expansion is moving anyway: the London route follows last month’s start of Alaska’s first-ever transatlantic service to Rome. and a third Europe link—to Iceland—is set to begin next week.

Alaska’s chief commercial officer, Andrew Harrison, framed the challenge in blunt terms. “You’ve seen a very significant drive to get airfares up,” he 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.”.

For US airlines like Alaska. the problem is sharper because most do not hedge fuel costs using financial derivatives the way many European airlines do. Fuel is also typically an airline’s second-highest expenditure after labor. meaning even partial cost recovery can quickly translate into pressure on profits.

The pressure isn’t theoretical. Even with higher airfares and checked bag fees, Harrison’s comments suggest that much of the fuel bill still isn’t being fully passed through to customers.

United Airlines’ approach underscores what “offsetting” can mean financially. In March, United’s CEO Scott Kirby said the carrier 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.

Alaska, however, is choosing a different bet: keep expanding around a customer segment that can better tolerate higher prices. Premium cabins have long been where airlines make more money. and Alaska is leaning into that with new international business-class suites featuring sliding privacy doors and lie-flat beds.

By 2028. Alaska also plans to introduce a premium economy cabin on its long-haul widebody aircraft—such as the Boeing 787 operating the London route. Starlink’s high-speed in-flight WiFi is another part of the appeal. 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.

Demand, at least in surveys, appears resilient. A Bank of America survey of 4. 000 people conducted in April found that around 30% of people say they won’t change their summer travel plans due to rising gas prices. The same survey said middle- and higher-income households are seeing stronger travel spending.

Geography matters, too. The Bank of America survey found Europe remained the most attractive vacation destination this year. and that—compared to 2025—Europe has become at least 10% more popular with middle- and higher-income households. It is less popular with lower-income households, according to the survey, which adds another layer to the competitive picture.

Competition is already there at the Seattle-to-London route. British Airways and Delta Air Lines already fly between Seattle and London, while Virgin Atlantic is suspending its route for the winter season.

To get around Heathrow’s capacity constraints. Alaska is leasing its slot at the London airport from American Airlines. another Oneworld alliance member. Harrison said: “Working together with our Oneworld partners has just given us amazing opportunity in what we know is a very highly congested and competitive airport.”.

American Airlines’ position in the story matters beyond the slot. Because British Airways is also a Oneworld member, Alaska customers can connect on Alaska flights onward to other destinations across the continent.

Harrison pointed to the “state-of-the-art aircraft” on the route. manufactured in the last 12 months. as well as Alaska’s Seattle hub with 105 destinations. Alaska’s ability to operate these long-haul transatlantic flights is linked to its acquisition of Hawaiian Airlines. which had a fleet and order book of 787s.

Even with fuel prices putting the industry under strain. Alaska’s leadership is signaling that the current turbulence isn’t changing the destination list. Harrison said: “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.”.

He added: “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.”

In practical terms, Alaska said it is building long-term capacity and brand around international growth. “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.”.

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

Alaska Airlines jet fuel costs Iran war premium cabins Seattle to London transatlantic expansion Heathrow slot Oneworld Starlink Boeing 787 Andrew Harrison Scott Kirby