If Airlines Are Saving Money on Fuel, Why Aren’t Flights Cheaper?

We’re sure you’ve noticed that the price of gas has been significantly low, but what you may not have noticed is that the price of jet fuel is low as well. So you may be thinking: “If the price of jet fuel is low, why aren’t airlines offering cheaper flights?”

The short answer is – because they don’t have to.

Fuel prices tend to fall during downturns, which means fewer people have the funds to travel and as a result, airlines lose money. This time, however, people are booking flights at a normal rate while oil prices are low, so airlines are taking advantage of it. In fact, airfare prices have actually gone up. According to data from the Airlines Reporting Corp., the average price of a flight rose 3% in the first nine months of this year. It’s now up to $374.96, less $56.32 in taxes and fees.

Many times, fuel charges make up about half of a flight’s price. This means that you would see a significant drop in airfare if airlines decided to adjust the price accordingly. Instead, however, they’re using the extra money in an arguably good way. Airlines are spending it on more fuel-efficient jets, investor payments, marketing, salary and benefit costs, maintenance fees, and more, to try to benefit consumers.

Over the course of 12 months, airlines have saved nearly $1.6 billion in fuel costs, which has helped them post a 5.7% profit margin in the first three quarters of this year. They’re also currently selling a record 85% of their domestic seats, so there’s really no reason they would need to lower their flight prices. In fact, according to the Associated Press, U.S. carriers have spent around $10.2 billion on capital improvements this year, which is the most they’ve spent since the 9/11 attacks. These improvements include updates to airline terminals, computers, and reservation systems.

What do you think about the situation? Do you agree with what airlines are doing or do you think they should lower flight prices?

And remember – airfare may be going up, but we’ve still got great Newark Airport parking rates! Give us a call for your next trip.