Weekend survey: Are the latest fare hikes fair?

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.
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Ridiculous or not? Allegiant proposes new airfare that changes before the date of travel

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.
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If fuel costs are under control, then why are airlines stalling?

ishot-2The 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 feesseem to be under control, what’s wrong here?

Why are carriers like Southwest posting losses?
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