So, how expensive is fuel for the airline industry? Brace yourself: the situation is pretty ugly. In April 2011, airlines in the United States dropped an average of $2.99 a gallon on fuel. That number sounds a lot better than what you’re seeing at the pump, right? How can it be that bad?
Well, this is yet another month-over-month increase. In March, the airlines spent an average of only $2.80 a gallon on get fuel, according to the latest data from the U.S Department of Transportation‘s Bureau of Transportation Statistics. In 30 days, we’re looking at a 6.8 percent spike. Look back even further, and the numbers don’t get any prettier. In April 2010, the U.S. airline industry spent an average of $2.29 on fuel. In one year, the average cost has surged an incredible 31 percent!
If you thought driving was too expensive because of gas prices, you’ll find the skies decidedly unfriendly.
[photo by octal via Flickr]
One of the biggest factors that comes into the cost of your airline tickets is the price of oil. Since the market is so competitive and the products so similar, airlines operate on razor thin margins — margins that take a big hit when the price of crude goes through the roof.
This is why you hear all sorts of bellyaching from the industry when consumers lament the days of $250 transcontinental tickets. Oil has gone up dramatically over the last forty years while ticket prices haven’t matured in kind.
Allegiant Airlines, however, has a new strategy to mitigate the price of jet fuel. With their planned “variable-price” tickets, an additional fee added to your ticket will fluctuate with the price of oil. If tensions in the Middle East take off and oil prices spike? Then you pay a bit more for your ticket when you get the the airport. If the United States taps into its secret reserve and hands out oil in the streets in milk jugs? Then you get a little back when you head to the airport.
It’s genius in a way, because this way the airline can help mitigate the impact of oil on it’s revenue stream and passengers get the small slice of hope that their tickets might fall in price. It’s the perfect model for an airline based out of Las Vegas.
Scott Mayerowitz, AP writer hosted at the Seattle Times has the full details on the proposed plan. Note, the airline has not concrete plans to implement the variable priced tickets, but it’s a model that they’re heavily considering.
[flickr image via planetc1]
When it comes to luggage, airlines seem to be involved in some kind of secret contest to see who can cause the most damage. In the past, airlines have left luggage out in the rain for days, set bags on fire and one airline saw 100’s of bags end up in a dumpster behind a pet store.
As of last Sunday, there appears to be a new winner in the race for baggage mistreatment – Delta Airlines. When passengers returning home from Puerto Rico retrieved their bags, they discovered that the bags were drenched in jet fuel.
Delta showed it really cares by sending the passengers home with their flammable luggage and a complaint form, telling them to wash everything, then to submit a reimbursement form within 24 hours.
Passengers think the jet fuel contamination happened at the Puerto Rico airport, and are obviously very worried that their bags sat in the luggage hold giving off harmful fumes.
If Delta did indeed load the bags knowing that they were covered in jet fuel, I’m sure someone at the FAA will want to have a word with them – a baggage hold filled with fuel fumes could have created a huge disaster. Then again, knowing how well airlines treat their passengers, I wouldn’t be surprised if these passengers receive a bill for the jet fuel.
The new trend among all sorts of green energies is in bio-fuels, those combustible fluids made from renewable sources such as switch grass, corn or soybeans. They’re all over the place in the automotive industry, millions of cars burning E38, offering flex fuel options and touting their eco consciousness.
It should only follow that the airline industry jumped on the wagon.
But how valid is the concept of using bio-fuels to power an aircraft? From the combustion standpoint, the science is there, and several airlines have already proved that bio-fuels can be used for propulsion. Virgin Atlantic, Air New Zealand and JAL have all operated international flights with partially loaded eco-fuels, while stateside, Continental has also shown positive results in one of their Boeing 737 aircraft.
Could this all just be part of the marketing eco trend though? ANZ’s 747 on which they performed their bio fuel test was scrapped last year after sitting on the idle tarmac, and ever since the main media hump earlier this year, jet bio fuel tests have been pretty mum. The fact of the matter is, irrespective of the source or processing, eco fuel just isn’t as efficient as anything from fossil sources. And when it comes to the bottom line, we all know that the airlines love to be frugal.
Asked about the current market’s readiness towards bio fuel, out source inside of the production industry was cautious, saying ” … there are some unsubstantiated claims out there and things like stunts with test flights do not have anything to do with the readiness of the fuel on a production basis for air travel.”
Take that for what it’s worth, but it sounds like eco-fuels have a long way to go before entering the mainstream air travel industry.
In past years, Memorial Day signaled the end of sweetheart flight prices. This year, a sinking economy stretched the deals a bit longer, but experts say the good times may be coming to a close. Remember the problems last summer, with higher prices blamed on jet fuel? Well, we could see the cost of oil work the same dismal magic this summer.
Rick Seaney, CEO of FareCompare.com, cites recent fare increases of $10 to $20 per roundtrip as an indicator that we are the brink of an upswing. But, these are counterbalanced by new lows elsewhere. A recent survey by Travelocity shows ticket prices down 17 percent for trips between Memorial Day and Labor Day. So, buyers and sellers are locked in a silent struggle to determine how much your next vacation will cost.
With an eye out for possible deals, customers are waiting, booking their flights 86 days ahead instead of the usual 90. While this doesn’t seem like much, it takes a lot of last minute purchases to bring the average down.
Even if airline fares are coming back, you can still take advantage of the lows now. If you’re thinking about taking a vacation, stop … and take action instead.