DejaNews – Rising Jet Fuel Prices Cause Airlines to Raise Fares

Posted by A. Caleb Hartley on January 9th, 2008 filed in Air Transport, airline, alternative, Asia, aviation, awareness, business, carbon footprint, crude, economic, energy, entrepreneurship, environment, environmental, fare, fuel, gas, gasoline, jet, oil, price, profit, renewable, technology, ticket, transportation

Welcome back to DejaNews – today we discuss the airlines’ fare hikes in response to rising jet fuel prices.

According to Ground Support Worldwide, airlines are pushing their fares in the vertical, upwards direction due to “oil’s latest surge.”

The article mentions that crude futures have crossed the “once unthinkable” $100/barrel mark (unthinkable by those who didn’t understand the term “non-renewable”), causing most airlines to raise fares by $10-$20 per ticket.

United Airlines, Delta Airlines, Air Canada, Air Tran, and Midwest Airlines were specifically mentioned in the article, which also stated that “carriers tried to raise fares 23 times last year.”

United Airlines’ spokeperson Robin Urbanski “acknowledged [that] fares in and out of some cities are higher than they used to be, but ‘are still relatively lower than a few years ago given that fuel is our highest expense.’”

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As an environmentaslist, I’m always torn about the airlines… aviation is one of my favorite topics, and I’m a pilot as well.  My education is in aviation management and entrepreneurship, so I also understand costs and profit motive – in aviation and in other businesses.  I also know that some environmentalists will just say, “Good.  Higher ticket prices mean fewer people will fly, and flying is a large carbon-footprint-producer.” I don’t necessarily think it’s that simple (nor should it be).

Business-people in general claim to be (and try to act as if they are) future-focused.  More than anything else, that means that they are focused on the future of their company’s profits for the sake of their shareholders.  What I don’t understand is that these same business people generally aren’t thinking about where their company’s future supplies will come from when the current supplies are gone.

Business people “get” supply and demand – it’s basic economics.  If the demand exceeds the supply prices go up.  Guess what is happening with oil prices, folks?  Demand continues to exceed supply… and the market responds.  As prices increase, demand SHOULD decrease – but oil is an inelastic commodity.  In other words, if you have to get to work to survive, you’ll put gas in the tank of your car when the tank is empty no matter the price.  You don’t have a choice.

The airlines survive on jet fuel.  It is their largest expense and it is their life-blood.  Without it, they don’t have a business.  So where will it come from when the jet fuel is gone?  Or when its cost is too high for your customers/passengers to bear any more increase in ticket prices?

Why aren’t the leaders of the airline and transportation industries hot-under-the-collar for alternative fuel?  Or alternative propulsion technologies?  Why aren’t the airlines using some of their estimated 3.5-4.5 billion dollar profits to speed up the research of alternative and renewable fuels?

Frustrated in Fantasyland,
A. Caleb Hartley

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Am I completely insane to think that business might think about the future BEYOND next quarter’s 10Q? Let me have it in the comments!

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