More travelers are packing airplanes, but it's getting more expensive to fly them.
Jet-fuel prices have climbed 15 percent this year, and have surged around 60 percent over the past year, according to S&P Global Platts, presenting airlines with a growing fuel bill just before the summer travel rush, the busiest time of year.
Airlines have a few options to handle the spike in their biggest expense after labor: cut service or raise fares. That amounts to a game of chicken. Airlines don't want to risk losing customers to a competitor with better fares or a more robust schedule.
"I envision this like a high school dance," Jamie Baker, senior airline analyst at J.P. Morgan Chase. "It's always tricky to go first."
Making the wrong choices could risk further declines in the sector. The NYSE Arca Airline Index is down nearly 9 percent this year, while the S&P 500 is up 1.5 percent. Investors have shown they will punish airlines over even the possibility of an airfare war.
American Airlines, the world's largest carrier, trimmed its 2018 profit forecast last month, as jet fuel costs rose. CEO Doug Parker last month told investors that fares would likely rise because of the increase in fuel prices.
Airlines set prices and sell tickets often months in advance, so passengers may not be paying for the more expensive fuel, at least just yet.
Airfare during the peak summer travel season is looking cheaper than last year, according to a recent report from fare-prediction app Hopper. A trip to Europe is about $1,019, a 9 percent drop from summer 2017, while a roundtrip domestic flight is about $347, around 6 percent less than a year ago, the report said.
What comes with a ticket has changed this year though. Delta and American are taking their no-frills basic economy tickets international and will be charging for checked luggage for some of the cheapest coach-class tickets.