Tuesday, March 8, 2011

Fares and Surcharges Take Off

With the Libyan conflict impacting oil supplies and speculation sweeping the world about the prospects of unrest in Iran and Saudi Arabia, the price of jet fuel is surging.

Fuel prices drive airline costs, and this has happened before.  Actually, it's happened many times.  In each of the recent cases, however, airlines have been burdened with excess capacity.  They've also had to contend with economic downturns that have eviscerated business travel.  The results have been a race to the bottom on fares to lure leisure travelers and massive operating losses.

This time, it's different.  Really.

Oil still drives fuel prices, and fuel still drives airline costs.  But demand is stronger now, and the airlines have slashed capacity over the last several years.  There are more people wanting to travel than there are seats in which to place them, and that means that airlines don't need to lower fares.

And they aren't lowering them.  They're raising them.

What's more, they're raising other charges too.  In addition to higher fares, airlines are boosting fuel surcharges and imposing peak-travel-time surcharges. 

If you need to travel for work and your employer is picking up the tab, you may not notice the difference.  For those of us with an inclination to explore, however, be warned: the latest era of deep discounts is drawing to a close.  You're going to be paying more to fly.

1 comment:

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