Here’s a question I’ve been getting a lot since the beginning of the year: Are the current round of airfare hikes justified?
Sure, energy prices are rising with the turmoil in the Middle East. Jet fuel prices are up more than 50 percent from a year ago.
But don’t airlines hedge their fuel purchases? (Hedging allows airlines to pre-pay for their fuel, offsetting the risk of higher prices.)
With airline ticket prices up by an average of more than $50 since the beginning of the year, are carriers just trying to cover their increased costs — or are they exploiting our expectations that ticket prices will rise, when, in fact, they have no reason to?
At least not yet.
Read more “Weekend survey: Are the latest fare hikes fair?”
If you’ve ever asked yourself, “What will they think of next?” then here’s one possible answer: How about an airline ticket price that rises or falls with the price of fuel?
Sound far-fetched? Yes, but that isn’t stopping Allegiant Air from proposing it. Buried deep within a recent letter to the Transportation Department (PDF), the no-frills carrier drops a bombshell.
“Allegiant is considering a new pricing option for use on its website,” writes its chairman, Maurice J. Gallagher, Jr. “When making a purchase, consumer would be able to choose between a traditional “locked in” fare that would not fluctuate, and a lower fare that could change before the date of travel. That lower fare could be reduced further or could increase (up to a set maximum that would be clearly disclosed) depending on changes in fuel price between the booking and travel dates.”
In other words, Allegiant is prepared to offer you a cheaper ticket if you assume the risk of fluctuating oil prices. If energy prices rise, so does the cost of your transportation. If they fall, you could save money.
Read more “Ridiculous or not? Allegiant proposes new airfare that changes before the date of travel”
The Bureau of Transportation Statistics has some fresh numbers this morning that suggest airlines are no longer spending a fortune on fuel. Last August, domestic carriers spent an average of $2.02 per gallon on fuel — up from $1.90 a gallon the previous month, but down dramatically from the $3.54 in August 2008.
Given that fuel prices — which, after all, were the excuse for adding more fees — seem to be under control, what’s wrong here?
Why are carriers like Southwest posting losses?
Read more “If fuel costs are under control, then why are airlines stalling?”