Cheaper Oil! But dont expect airline ticket prices to drop anytime soon.

[lozina]

Been thinking about how the cheaper oil is of course making gasoline cheaper but also food prices.

This got me thinking about airline ticket prices and rules (such as new baggage fees) since I fly often. I should expect that to drop too right? They were certainly quick to raise the price on rising oil prices afterall...

But sadly, don't expect such logic anytime soon...

http://www.nytimes.com/2014/12/11/b...ts-for-airlines-but-fares-wont-fall.html?_r=0

Seems the truth is, there is simply not enough competition in the airlines :thumbsdown:

 

[Exterous]

Been thinking about how the cheaper oil is of course making gasoline cheaper but also food prices.

This got me thinking about airline ticket prices and rules (such as new baggage fees) since I fly often. I should expect that to drop too right? They were certainly quick to raise the price on rising oil prices afterall...

But sadly, don't expect such logic anytime soon...

http://www.nytimes.com/2014/12/11/b...ts-for-airlines-but-fares-wont-fall.html?_r=0

Seems the truth is, there is simply not enough competition in the airlines :thumbsdown:

I'm not sure why people are expecting airplane tickets to go down. Ridership is above pre-recession levels after the airlines spent years reducing capacity due to low ridership. Jan - June saw a new all time high in Passenger Load Factor. Lots of demand and constrained supply do not make for cheap tickets. Combine this with less competition and I highly doubt there will be any decrease in prices any time soon. If memory servers both AA and Delta have committed to capacity increases of about half what their projected ridership increases are (1-1.2% capacity increase compared to a 2-2.2% ridership increase)

 

[cabri]

Supply and demand

Also, some airlines that hedged on fuel prices before the upswing made out during the upswing.

Those that hedged during the upswing are paying those prices or even above the current prices and hurting.

 

[sunzt]

Remember how those growing ancillary fees (like up your butt baggage fees, etc) were justified by airlines to combat high oil prices? Yeah.... guess they're not going away either.....

 

[Fenixgoon]

Been thinking about how the cheaper oil is of course making gasoline cheaper but also food prices.

This got me thinking about airline ticket prices and rules (such as new baggage fees) since I fly often. I should expect that to drop too right? They were certainly quick to raise the price on rising oil prices afterall...

But sadly, don't expect such logic anytime soon...

http://www.nytimes.com/2014/12/11/b...ts-for-airlines-but-fares-wont-fall.html?_r=0

Seems the truth is, there is simply not enough competition in the airlines :thumbsdown:

airlines buy fuel contracts years in advance, therefore their prices are locked in. your logic fails.

 

[dullard]

Please tell me this: why should the price that an item sells at be adjusted when the costs for that item change.

Hint: as long as the item is profitable, it shouldn't. The true mathematical optimal price to maximize profit is a function of supply and demand. It is not a function of the raw material costs. The oil price does not affect supply (in the short term or even medium term for airlines) or demand, thus it does not affect true optimal price.

 

[Victorian Gray]

airlines buy fuel contracts years in advance, therefore their prices are locked in. your logic fails.

Apparently that's been changing

http://blogs.platts.com/2014/09/01/us-airlines-hedging/

http://www.bloomberg.com/news/2014-08-13/european-airlines-cut-jet-fuel-hedging-as-prices-fall.html

 

[OverVolt]

Locked-in prices and futures contracts are dumb.

Oil is going to be $100/barrel again by the time prices drop. The financial markets are such lulz.

Oil should not be flailing around in price like it is. Someone screwed up big time somewhere.

 

[Mai72]

You want cheaper airline tickets?

Let's protest for a few weeks and refuse to fly anywhere. Oh that's right. People don't stick together anymore.

 

[compuwiz1]

You might see airline tickets follow the fuel prices, but it's gonna take a long time. Fuel prices for the major airlines have been bid, bought and paid for long before you fly. I'd give it a year.

 

[lozina]

airlines buy fuel contracts years in advance, therefore their prices are locked in. your logic fails.

Yet, the moment oil prices began to spike they were quicker than greased lightning to increase prices and add new fees. :whiste:

 

[dmcowen674]

airlines buy fuel contracts years in advance, therefore their prices are locked in. your logic fails.

Not true.

Delta Airlines bought their own refinery even.

I have a friend that works in delivery.

His company just got an order for 100 million gallons of fuel because it is cheap now.