Oil Prices Down, Airfares Not

The Associated Press recently asked and ably answered the following question: Now that oil prices are down, why aren’t airfares?

You could read the whole explanation, which is highly informative. I recommend it.

Or you could read my summary, which is much less informative but quite pithy: Airlines aren’t dropping airfares because they don’t have to. Fares aren’t about costs. They’re about competitive pressure.

I’m not going to complain about airlines keeping fares up. I do believe they need the revenue.

I’m just going to complain about airlines calling their price increases fuel surcharges. If they’re fuel surcharges, they should go down when fuel prices go down.

If they’re not fuel surcharges, they should be called something else. Like fare increases.


2 thoughts on “Oil Prices Down, Airfares Not

  1. Steve

    They can charge all they want, but all it will do is discourage people from flying. My wife would like us to visit her family over Christmas, but at $450 per ticket, its just too expensive for the 4 of us. So while they may need the revenue, keeping fares above marginal costs is unlikely to get it for them.

  2. Alan

    I find the major airlines’ business practices and public whining disingenuous at best and outright deceitful and unethical. As claimed above, the airlines are entitled to a healthy profit and fare increases, etc. I don’t disagree, not in a capitalist unregulated industry.
    I do, however, totally begrudge the pricing practices of the airlines and publicly crying that the fuel costs are putting them out. Well, they increased their fares nearly 50 percent (or more in some markets) during the fuel crunch of the last 180 days, but they have yet to give the customers a real break now that gas and fuel prices have dipped below $80 per barrel. If the fuel prices dictate their pricing, then it should cost more the further the airline flies (i.e. NYC to LA should cost more than NYC to Cleveland).
    But actual costs are much lower for longer flights or on routes in which profitable Southwest Air also flies. I really resent being treated like some dumb idiot by the airline CEOs and public spokespeople, and wish for them to run an honest practice. And if Southwest can charge lower fares with superior service on similar routes, then do the same.
    For me–living in Philadelphia–it costs me close to 2000 to fly a family of 4 to Detroit to see my family. That is just out of the world and unaffordable. I am waiting on the airlines to follow suit with the oil prices and adjust downward to be consistent with their woeful, lying messages of consumer gouging over the summer.


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