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Article Series: Airline Travel
Airlines, Planes & Airport Security
How
Do Gas Prices Impact The Price Of A Flight?
If
you’ve cringed at the ticking gas pump as you’ve filled
up your SUV lately, then
it should be no
surprise to you that gas prices are impacting the price of
airline travel. Your tank may take 30 gallons; a
jetliner fills up with an astronomical 5,000 gallons at a
shot. According
to economist Dave Swearinga, “The airlines consume 19 billion
gallons of jet fuel every year, and every penny change in
the price is a $190 million reduction in their cost." With
crude oil running at well over $100 per barrel (August 2008)
it’s unlikely that prices will begin to
fall anytime soon, either.
In addition to the high cost of oil, airline operators must
also pay the premium that refiners charge to turn crude oil
into jet fuel. This premium surged from $3 per barrel to
$25 per barrel in 2005, making the effective cost of a barrel
of oil around $95. Such exorbitant prices may end up putting
several of airlines on the brink of bankruptcy, such as Delta,
right over the edge.
"Fuel
prices are astronomical and that's an understatement," said
Southwest Airlines spokesman Ed Stewart. "You have to
do something about that at some point." This is coming
from an airline that one-upped the other airlines by locking
in fuel rates years ago. The company pays this lower locked-in
price per barrel for 85% of its fuel. But paying $100 per
barrel for that
extra
15% of its fuel has caused Southwest Airlines to increase
its one-way fares by $1-$3, based on distance.
Fortunately
for travelers, the competition from low-cost airlines like
Southwest, JetBlue, and Frontier, have made
it impossible for the major airlines to pass all of the added
fuel costs on to their customers. Even so, fares on the major
airlines, namely Continental, United, American, Delta, Northwest,
and U.S. Airways, are more representative of how gas prices
are impacting the price of your flight. Whereas Southwest
locked in low fuel rates, American Airlines contracted for
about one-third of its fuel at a price that now seems too
high. While these fare increases don’t typically impact
the airlines’ extra-low sale fares, you’re likely to see
fewer sales than usual. Unfortunately for travelers, fare
hikes have continued and will continue.
This fall, as gas prices are showing us lower prices than
we’ve seen in a long time, the price of your flight will
still be high. The average advance round-trip fare for travel
on Thanksgiving weekend is $434, up 15% from one year ago,
according to a study by Sabre Airline Solutions.
Don’t expect the increase in fares to affect
the popularity of air travel, however. Early bookings for
flights this Thanksgiving
are up 42% over last years—even with flight prices up 15%. "Air
travel is still a tremendous bargain," Stan Gadek, Chief
Financial Officer of AirTran Airways, told Knight Ridder, "With
the price of gas, you have to evaluate closely whether you're
saving much by not flying." In many cases, the cost
of short- to medium-length flights can be less expensive
than driving. Airlines argue, flying takes less time and
is statistically safer than driving a car.
As you make your holiday plans this year, lower gas prices
and higher flight prices may cause you to rethink the time
savings of air travel. Coupled with the increases in security
wait time at airports and the high demand for seats on airplanes,
your gas-guzzling SUV may just be your ticket to holiday
peace of mind this year.
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SolveYourProblem.com
: 2008
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