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High Oil Prices Mean Higher Airfares

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As oil prices barrel towards record highs, airlines are beginning to react with jacking up your airfares. Could this be a permanent trend, or will prices decline again if the cost of oil drops?

The cost of fueling aircraft is one of the biggest ongoing expenses for airlines. Gone are the days when oil clocked in at 50 or 60 dollars a barrel. As the price per barrel is now well beyond the $100 mark, airlines are not only complaining, but responding with airfare hikes.

It has not been uncommon to see ticket prices include oil surcharges, but now it seems that most of the larger airlines are set to increase the cost of your airline ticket to offset the tremendous jump in the price of oil.

The major U.S. carriers have pretty much all increased their domestic airfares by at least $20 roundtrip. Although airfare specials may nullify these increases, the cost of oil is a real expense to airlines, and one that will be passed on to consumers. 2007 was, for the most part, a banner year for the airlines in terms of profit, but with the cost of oil nearly doubling within a relatively short time span, that cost will need to be made up somewhere.

In the past, one could argue that the decrease in baggage allowances made up for the increase in fuel costs. But where does one go next? Ticket prices would appear to be the next logical target. And this is how airlines have begun to respond, by tacking on fare increases.

Within one season, from the beginning to the end of the summer of 2007, the price of crude oil increased by about 25%. So when the airlines complain about the cost of oil, there really is something substantial to it. 2008 has seen record prices, even going as high as $140 a barrel for crude oil.

What are some of the fare increases, and who has hiked up their airfares?
  • Round-trip domestic fares were increased by $20 by: American Airlines, Continental Airlines, Northwest Airlines, United Airlines, US Airways, Delta Airlines.
  • AirTran increased round-trip prices by $10 on last minute tickets (within 7 days of travel). $20 round-trip fare increases for longer flights.
  • In India, airlines are reported to have increased airfares by RS150 per flight (approximately $3.80 USD) to reflect the higher cost of oil.
  • In the UK, airlines are looking at increasing airfare costs as well, largely because they budgeted costs for 2008 based on early 2007 fuel costs, when crude oil was still around $75 a barrel.
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