High fuel prices hurt the American family and they also hurt many industries, but what about the airline industry? The transportation sector relies on fuel to move around products in people and high fuel prices do impact this industry. Do high fuel prices hurt the airline industry as well? This is indeed a very good question and recently someone had asked clarification on this subject from an online think tank member when they stated; On average when the fuel prices rise, is it the airlines themselves that take the blow cost wise, or do they raise the price in airline tickets to cover the cost? The Airlines will attempt to pass on costs and we are seeing this now. But it is not always possible to do this if tickets have already been sold in advance and the prices rise very quickly, unless of course there are stipulations in the sale of the ticket that surcharges maybe added later. One must also realize that often these times of high fuel prices are also used when a weak airline is hurting or in bankruptcy as the competition seek to cannibalize on certain routes with price wars. Additionally costs in airfreight go up to and philosophically speaking this acts like an additional tax on society, because what ever is shipped, well the price goes up on those items to cover the increased costs. Companies hedge against this by raising prices; trucking, rail, shipping and airfreight; all have increased profits Q1, when the fuel prices go down, they hesitate to lower costs for a while and the longer they wait the more they make in the differences in the increased margins due to less fuel costs. But you will also see a first mover; price war pull back coupled with aggressive sales campaigns and discount offers to move freight and or people too. People in airlines are really only organic self-moving up-right shaped boxes with special needs during flight. Philosophically thinking of course. So consider this in 2006. |
