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If you were an airline, you’d be paying $1 per gallon less for fuel

July 13, 2008

I got a little curious after hearing about the airline industry’s self-serving push to regulate oil speculation. It made me wonder how much the airlines were paying for a gallon of fuel.

Here’s the somewhat surprising answer: on average, the airlines are shelling out up to $1 per gallon less than we do at the pump.

I’m no expert on the airline industry, and unlike some other travel columnists, I’m not going to pretend to be one. But I think these numbers speak for themselves.

According to the Bureau of Transportation Statistics, the US airlines spent an average of $3.05 a gallon in May, or roughly $3.5 billion. It’s the latest month for which statistics are available.

But compare that to $3.81 per gallon of gasoline paid by the average motorist in the United States the same month, according to the government’s Energy Information Administration. When you look the fuel costs of non-scheduled airlines — they paid $2.81 per gallon — it comes out to about a $1 per gallon difference.

I know, I know. Comparing unleaded gasoline to jet fuel is problematic. And so is comparing wholesale prices to retail prices. Point taken.

But I don’t care.

If airlines are paying a buck per gallon less than we are, they should just shut up about energy costs. If anyone has a right to complain, it’s us.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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15 comments

  • Jesse

    In the State of California we are paying well over $4.00 per gallon. Every time I hear someone complaining about the prices I provide them the next two scenarios:

    1) In other parts of the world, for example UK, I believe they are paying over $8 per gallon of petrol; therefore, relatively speaking we have it good. Let’s not complain!

    2) On the other hand, compared to last year, even February 2008, we are paying $1.50 more per gallon, so there’s plenty to complain about…

    Depends on which position you want to take…another quick and fun fact to think about: Venezuela $0.50 per gallon or so

  • Kevin

    The problem with comparing Gas prices in the US to other countries is that most countries with HIGH gas prices also have a much better public transportation system then we do…

  • http://bastionhbs.typepad.com Derek

    I’m in agreement with Jesse about other places paying more for gas than us. I don’t however, agree that we can make a blanket statement and say that we can’t complain because someone else pays more. Since you gave two points of view, this is for those that only feel that the first point of view is the case.

    You have to factor in their economy as well. Although the UK is facing an economic downturn as well, their pay structure and tax structure is different than ours. What’s happened here is that gas went up and then food went up and then services went up, but on average our pay didn’t increase and our taxes didn’t decrease. So, now we have increased costs, but no increased income to offset it.

    I’m of the opinion that there is a little room to complain…or at least talk loud enough to get someone’s attention.

  • Joe Farrell

    If I were a bird I could fly – this one is not all that relevant Chris – when ‘gas’ was $2 / gal the airlines were still paying $1 less. So, that means their fuel cost has more than doubled. Which means that the fare structure where they were losing moderate amounts of money but making money operationally so they could stay in business, now meant huge losses.

    In my book that means raise prices – folks understand that empirically. You do not add fees that will survive a spike in fuel prices – that just angers people. You raise fares so that when the price of fuel comes down you can adjust the price downward.

  • Carver Farrow

    I’m with Jesse. What does the price that I pay fro cash for my car have anything to do with this discussion? That is a red herring at best. The point is that most airlines pay more for fuel today than they did yesterday. As your costs increase, and your gross revenue remains the same, your profits decrease by the same amount as your increase in your cost basis.

    What I pay for gas is not a factor in that equation.

    Therefore you have to increase prices. The only real question is whether the airlines do a straightforward fare increase that affects all passengers, or do they do a la carte pricing which only affects some passengers?

  • Sebastian Okser

    I’m a bit conflicted about these numbers because the IATA states there fuel prices and their most recent statistic on the price of fuel is $4.304 per gallon (granted this is the current price and not the price in May). http://www.iata.org/whatwedo/economics/fuel_monitor/index.htm

  • Chuck3rd

    Do you really think that the higher airfares are not directly related to fuel prices? Seriously? If you ran a business that depended on oil- up to 70% of operating costs- you’d probably be inclined to raise your prices, too. This won’t be long-winded…just think about this statement and then tell me that fuel costs are not that big of a deal to airlines:

    “If Southwest Airlines, the nations only major airline that turns a profit, did not have the luxury of having a fuel hedge program, they would have be in the red just like all of the other guys”.

    …and that’s a fact.

  • Joshua Katt

    You are comparing apples to oranges, like trying to compare a gallon of propane or natural gas to automotive fuel. Different weights, compositions and uses and how far you can actually get with it.

    Same with the comparisons to UK/Europe pricing. If taxes make up 50%+ of the retail price to support a public transportation infrastructure (or other uses), how do these compare?

    Its either a slow news day or Chris is not as intelligent as I once thought.

    I have a small plane sitting unused since my fuel is over $6.50 per gallon. And it used to take automotive fuel up until a few years ago before the 10% ethanol additive became mandatory. Talk about being screwed!

  • Geoff M

    Let’s look at this from another perspective.

    In South America gasoline is almost free….under $0.50 per gallon. It does not matter what costs are, we pay it….The airlines need to place a proper charge for flight, food, baggage, SERVICE, and timeliness. No bumping is necessary. Go back to 1970 when you had 3 fares: One way, 30 day Round trip to Saturday night excursion, and Family Plan (needs to be re-named for 2008). Airlines would not have to deal with 340 fares between Pittsburgh and SanFrancisco each with a different rule and refundability.

    The second choice is “this is the MSRP” pay it….use it or lose it. Would that just not be so simple.

  • Sebastian Okser

    I think a lot of people have lost sight of the real issue that is facing the passengers. I don’t think people are complaining that all airlines may have to raise ticket costs because of increased fuel prices. The problem is arising that we aren’t being charged correctly. We are being “hit up” for much more than the fuel actually costs.

    We can show proof that the airlines have deeper concerns than the cost of fuel because there are numerous airlines in the world who charge less and make larger profits than companies like America, United and U.S Airways.

    If a major U.S airline wants to charge me for baggage, food, water, ticketing, breathing their air or anything else then I’ll accept the charges. I recently moved from New York to Europe and I’m very used to airlines charging for anything that’s not bolted down, but I expect dirt cheap fares when you do that.

    In short…if you are going to give me budget airline (no frills) service then charge me a budget airlines price. Yes, gas has gone up. Yes, all airfares will rise. But no, these fees being levied on us are not a direct result. They are rather stemming from the mismanagement of the airlines.

  • CJ

    Just a question rather than a comment. Can anyone calculate (taking into account the current cost of jet fuel and the unbundled services- baggage etc.) what an airline ticket from, say, JFK to SFO would be if it were priced to actually make a fair profit for the airline? No yield management involved, just by the ticket and go.

    I’ve been on busses and trains and never ran into 5 passengers who paid 5 different prices just to keep the vehicle full.

  • robert b.

    In all fairness Jetfuel ‘A’ is basically Kerosene, which requires less refinement and therefore is cheaper. In regards to the cost of fuel additionally airlines buy lagre ‘contracts’ of fuel therby acheving econimies of scale. You and I can do the same, by purchasing unleaded gas futures on the commodites futures market.
    If you exersize your contract the you get the commodity. It’s just that you then have to arrange delivery and storage. Not so simple, but you can get it at a discount to the pump price!
    The real problem for airlines is that to a large extent their fleet is ageing and inefficent (compared to the newest generation of aircraft). However, with a shrinking profit base and rising overhead coupled with a banking system perilously close to collapse there is little else for them to do but whine, like a jet engine.

  • http://www.bobyeager.com Robert Yeager

    I always get a kick out of the comments about European gas prices. I may be mistaken but I believe they drive less and use mass transportation more….because it is there. The US has let its mass transit fall way behind the need.

    I also believe that the vehicles purchased in Europe has less emissions controls then US. Very few people buy gas guzzlers either. They also have bigger taxes.

  • Janet Elliott

    Uhhh, where the heck did they get those fuel prices for airlines? I fly for a major airline and they print the price of fuel/gallon where we are on the flight release. I can tell you that the price for JetA has been ABOVE what I see at the pump for car gas for over a year. It’s been up to $4.40/gal. in DEN.

    it used to be lower than automobile gas but in the last year, it’s been more which is strange in itself. So, get off the thought that the airlines pay less. We pay more unless we are hedged, which we currently are not.

    Also, there are airlines out there, Frontier to name one, that is well run and is running very efficiently but fuel prices are killing them. They have good management and run a very transparent and clean organization. And yes, they treat their customers very well. So, don’t categorically demonize all airlines.

  • Adam

    Yeah I don’t know where this information is coming from. I just accessed what one of the legacy carriers in the country is paying for jet fuel in one of its major hubs (usually where it is the cheapest because they buy more in the hubs). Today that carrier is paying $4.13 per gallon. Seeing that the gas near my house today is $3.59 per gallon….I don’t see where this false information is coming from. Maybe one year ago this article would’ve been true. Also even the smaller regional jets are burning one gallon per minute per engine when the sit on the ground at idle. So even if they were paying less for fuel they sure use a lot more of it!

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