Could Reduced Oil Costs Mean Less Expensive Flight Seats

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Could Reduced Oil Costs Mean Less Expensive Flight Seats?

Senator Chuck Schumer attempts to question in wake of dropping gas prices, should ticket costs be dropping? Senator Chuck Schumer claims that you are having to pay too much for your flight ticket home this Christmas season.

The New York Democrat released a declaration today stating costs should reflect the low fuel costs flight companies have been paying because of the decrease in oil costs.

“At a period when the price of fuel is rapidly declining and earnings are increasing, it really is inquisitive as well as confounding that ticket costs tend to be sky-high and defying financial gravity, ” he stated in the release. Therefore I am advocating the Feds to step up and do a cost analysis for customers who must purchase vacation travel seat tickets that may break their budget.

The industry frequently increases costs very quickly whenever oil costs surge, however they appear to not be modifying for the historic drop in the expense of fuel; ticket costs should not skyrocket like a missile and come down just like a feather.”

Oil costs are sitting at about $60 for each barrel, the cheapest they have been in many years. Schumer states that gas prices may account for as much as half of an airlines price, which means that the decrease in fuel costs might be having massive effects on their bottom lines.

A trade company representing the big US carriers, Airlines for America, said that declining fuel prices meant that airlines could invest again in the business, and that reduced fuel prices didn’t mean as much as Schumer said they were.

“While fuel costs have abated off their historical highs, fuel is simply 1 price, and it is vital that you remember that for the very first 9 months for the 9 widely traded U. S. traveler service providers, operating costs increased 3.1 % in 2020, ” the declaration reads.

“This is really a capital-intensive company, and flight companies are making substantial investments, such as taking delivery of 317 brand new airplanes this year by itself.”

Imperial Capital LLC’s airline analyst, Bob McAdoo, does not believe anything legislative can come from Schumer’s problem, observing that the federal government hasn’t managed the flight business beyond security regulations since the 1978 Airline Deregulation Act.

“From time to time the federal government has discussed re-regulating prices,” he states. “Every time it has been brought up it has been declined in the legislature.”

Flights to get more expensive because of rising oil prices

Oil is at the highest price that it has been since 2020 and the cost will soon be passed on to plane passengers via ticket prices

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  • Lauren McMah for News.com.au

  • 6 Jun 2020, 16:17
  • Updated : 6 Jun 2020, 16:43

BAD news, budget travellers – the price of flights is about to get more expensive, according to the bosses of several major airlines.

At an annual meeting of the International Air Transport Association (IATA) in Sydney this week, a hot topic for airline bosses and delegates has been the skyrocketing price of oil, which is at its highest since 2020 — and rising at a faster rate than ticket prices.

With fuel making up around 25 per cent of an airline’s costs, they will be forced to drive up the price of their fares to cope, American Airlines chief executive officer Doug Parker warned.

He added that as carriers looked at ways to drive fuel efficiency, they may also consider reducing the capacity of their aircraft resulting in fewer seats to pick from, Fortune reports.

It’s not the first time Doug, who leads the world’s largest airline, has warned about having to pass on the rising cost of fuel to passengers.

In April he said: “Oil is our second-largest expense. So when it increases, the cost of air travel increases.”

He continued: “I would expect you would see higher fares to consumers over time.”

Air New Zealand chief executive Christopher Luxon echoed that warning in Sydney this week.

He told Reuters: “At this point with rising fuel, you control costs, raise prices and you may have some fall off in demand and reduce capacity.

“I think we are seeing pricing move up internationally and certainly yields come up as well.”

Reuters reports that Brent Crude – a major benchmark price for purchases of oil worldwide – is trading at around $99 a barrel, up nearly 50 percent from a year ago.

Some airline companies, such as China Eastern Airlines, have signalled plans to lock in oil prices while others, like Emirates and Delta, ruled it out.

Aviation chiefs and economists at the IATA conference suggested freezing prices did not avoid the inevitable impact of rising fuel costs.

Virgin Australia Holdings Ltd CEO John Borghetti told Reuters: “Whilst most of us have [prices locked in place], those prices eventually run out … and it is a question then of what do you do?”

“If you look at history, typically some of that cost has to be passed on at some point because you just simply can’t absorb it.”

Between mid-2020 and early 2020, lower oil prices ushered in an era of lower airfares and bigger growth for airlines.

This year, the price of oil is expected to average more than $91.40 (£52.20) a barrel, but the IATA had been expecting it to reach only $78.40 (£44.78).

The association has now revised its estimated overall industry profits to $44.6billion (£25.47billion), which is 12 per cent lower than it originally forecast in December.

IATA chief executive officer Alexandre de Juniac said: “We have seen a rise in the fuel cost now for almost 15 months.

“Usually you see an impact on fares 10 to 12 months after, but for the moment I have to say the fuel increase has not been passed on in fares.”

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