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Airfares rise with oil prices
March 11, 2011
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  • By Hugo Martin

    Airline ticket prices are on the rise again, and even industry experts can’t predict how much higher they will go. All this is making business-travel managers very nervous.

    For several months, airfares have been pushed up by growing demand and flights’ limited capacity. But the prices have been kept in check somewhat by consumer resistance and competition among airlines.

    Now turmoil in the Middle East and North Africa has raised fuel costs, which represent at least 25 percent of airline expenses. Each $1 increase in the price of a barrel of oil results in $1.6 billion in added costs to the worldwide airline industry, according to the International Air Transport Association.

    So it’s not very surprising that the nation’s largest airlines have adopted half a dozen fare increases since Jan. 1.

    During the fifth increase, however, the power of competition cut the price hike in half. In late February, major network carriers such as United, Continental, Delta and American raised domestic fares $20 per round trip. But those increases later were rolled back to $10 when low-fare airlines Southwest, JetBlue, AirTran and Frontier raised their prices only $10.

    “Airlines can’t afford to be $1 more than a competitor, or they don’t show up on the first page of results” on fare-comparison websites, said Rick Seaney, CEO of

    Consumers also have some power over prices, said George Hobica, the founder of travel website Airfarewatchdog.

    “The airlines are playing cat and mouse with the consumer: ‘Let’s see how much consumers are willing to take before they say enough is enough,'” he said.

    But fuel costs worry many business-travel managers. In a survey, more than 90 percent said they were concerned about the effect of rising oil prices on travel costs, with nearly half saying they were “very concerned.”,0,7594060.story

    Date: 2011-03-11