The price of jet fuel has plunged by 22 percent so far this year—a boon to airlines, for whom fuel is their single largest operating expense.
Common sense would suggest that such significant savings would be passed through to the airlines’ customers, in the form of lower ticket prices. But according to a Bloomberg article, this year’s airfares are up 1.7 percent over last year’s.
So, why aren’t prices decreasing as the airlines’ expenses fall? In a word, demand. Strong demand. As American president Scott Kirby put it, “In a strong demand environment, we don’t plan to go off and just proactively cut fares.”
The strength of demand for air travel is readily apparent in the airlines’ load factors (the percentage of seats sold), which are averaging over 80 percent.
The combination of low fuel prices and sustainably high fares is great for the airlines. Profits for the six largest U.S. carriers totaled $3.96 billion in the most recent quarter. And share prices are up as well.
For consumers, however, the picture is bleaker: more expensive tickets, to sit on more crowded planes.
Reader Reality Check
In inflation-adjusted dollars, today’s ticket prices are 15 percent lower than they were in 1995. Does that make air travel in 2015 a bargain, or not?
This article originally appeared on FrequentFlier.com.
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