How Are Airfares Still Costly Despite Low Jet Fuel Prices

Jet fuel only accounts for less than 40% of an airline’s total operating costs. A gallon of jet fuel cost approximately $2 for U.S. carriers.  The International Air Transport Association has stated that there can be a 26 % drop of total operating expenses if the oil prices were to stay the same. 

Although the fuel prices have dropped by 50%, travelers shouldn’t expect airfares and transportation costs to also lessen. Lower fuel prices can be both, good and bad news for the airlines. This is dependent on the carrier’s’ fuel hedging positions in the industry. But because of how unpredictable the jet fuel prices are, planning operation expenses become even harder. Fuel prices are just one of the cost factors in the airline industry.

Any profit airlines make due to lowered fuel costs being goes without benefits; those profits are invested in keeping up with other expenses that go into maintenance. The other expenses add up to have nearly little or no changes at all. Maintenance of the aircraft includes aircraft parts, labor cost, airlines promotion and other commissions as well.  

Gradually increasing ticket prices little at a time helps the airlines company take precautions for sudden fuel cost hikes. Due to the unpredictability of oil prices, the airlines industry is constantly looking out for various coping mechanisms and strategies to avoid sudden crisis. Recovering from previous losses and a number of other costs conclude that there really can be no connection between fuel costs and airfares.

 

Contact us to learn how this could impact your trip planning.