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Higher Fuel Costs Threaten to Send Airfares Skyrocketing in 2011

Unfortunately it looks like we're going to have to reopen our oil prices category. You'll remember that sky-high fuel prices were brutally hammering airlines during the summer of 2008. Publishing articles about the "end of travel as we know it," and predicting permanently high ticket prices became something of a cottage industry. Then the global economy functionally collapsed at the end of the year. With factories literally grinding to a halt, the demand for oil plummeted and—the law of supply and demand being what it is—oil prices soon followed. Ticket prices dropped somewhere back down to reasonable.

Now the economy is slowly recovering, and so oil prices are threatening to shoot back up. Oil import costs have skyrocketed roughly 300% over the last few months, and of course those costs get passed on to the companies that use fuel, at which point they get passed on to the rest of us. In the airline industry that means not just higher ticket prices, but also higher luggage fees and—just to make up for lost revenue—higher penalties.

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Airlines / Airline Stocks / Oil Prices / → All Tags

Adventures of Link: Wall Street Meltdown Good for Airlines

So today's cataclysmic Wall Street meltdown wasn't really that bad. Of course, there's still plenty of turmoil in the financial markets--and who knows what could happen tomorrow!

But at least one sorry bunch of losers managed to have a good day: Airline stocks as a whole were actually up today. (Most that lost value did better than the market at large.) We're not stock brokers, but $94-a-barrel oil has got to be part of the reason why.

Maybe now that its stock price is going back up, United can cut back on baggage fees? Nah!

Related Stories:
· Airline Stocks by Percent Change [Google Finance]
· Oil Prices Plunge Five Dollars on US Financial Meltdown [AFP, via Google]
· Airline Stocks Lifted by Oil Price Decline [MarketWatch]
· United Doubles Second-Bag Fee to $50 [Reuters]
· Airlines coverage [Jaunted]

Ryanair / Low Cost Carriers / LCCs / Europe Travel / Oil Prices / → All Tags

Ryanair Has €10 Tickets and a Fight Against Scraper Sites

The miracle budget airline that is Ryanair continues to buck the trend of low cost carriers across the world by actually decreasing prices, with a promise to cut fares by five percent--and with a huge sale on now with five million seats going for €10 (including taxes and charges) for September and October travel.

Anyone would think that Ryanair had a mystery supply of cheap fuel, but no, CEO Michael O'Leary has admitted he's messed up on the oil price front already; that's why Ryanair will probably only just break even this year. Even so, he's sticking with the price decrease promise anyway.

The other big drama for Ryanair these days is the crackdown on "scraper" websites that have been selling the carrier's flights. Any customer who buys one of these fares (which, ironically, often end up more expensive anyway) will have their booking canceled, so there's definitely no benefit in going to third-party sites. We're keen on picking up a few €10 fares ourselves, but we'll book direct. Promise.

Related Stories:
· I Screwed Up, Ryanair Boss Admits [Belfast Telegraph]
· Ryanair Clamps Down on Internet Ticket Touts [Reuters]
· Ryanair coverage [Jaunted]

[Photo: fabbriciuse]

Oil Prices / Airlines / Delta / → All Tags

Travel Snapshots: Airline CEOs Taking Their Case to the People

We settled into our seat on a Delta flight on Saturday and took a look at the offerings in the seatback pocket in front of us. Skymall catalog, check. Safety card, check. Wait, what's this one-page thing signed by a bunch of airline CEOs?

Oh, it's a laminated copy of the whiny open letter they circulated in July, asking us to write to Congress on their behalf to get those dastardly "speculators" out of the commodities markets. How splendidly tacky!

Related Stories:
· The Airlines Have Had It with These Global Oil Markets! [Jaunted]
· Travel Snapshots coverage [Jaunted]

Airlines / Oil Prices / Harry Reid / John Boehner / → All Tags

Congress Finally Ready to Meddle in Oil Markets

US Senator and majority leader Harry Reid (D-NV) unveiled what he's calling an anti-oil speculation bill on Wednesday, winning applause from the airline industry and even some scant praise from Republican senators. Reid's bill, which he hopes to put to a vote before Congress' August recess, would limit the number of oil futures an investor could hold as well as demand greater transparency from foreign markets and US traders who do business abroad.

Reid admits his legislation won't completely end speculative investing--isn't all investing speculative?--but his idea is to distinguish between investors actually in the market for oil to burn (like airlines) and those in the market for profits, with no intention of actually taking delivery (like hedge funds and investment banks).

While Republicans are also eager to score some points on the oil price issue this election season, they may have a chance to kill Reid's pro-regulation bill by tacking on drilling provisions. House minority leader John Boehner (R-OH) says just stopping speculation isn't enough:

It's just another excuse not to drill. Without speculators, you have no liquidity in these markets.

Related Stories:
· Reid Offers Speculation Bill, Drawing Mixed GOP Reaction [National Journal]
· US Senate Oil Speculator Bill Drops Higher Margins [Reuters]
· ATA Applauds Sen. Reid [MarketWatch]
· Oil Prices coverage [Jaunted]

[Photo: Clinton Steeds]

Ryanair / Low Cost Carriers / LCCs / British Airways / Willie Walsh / Airlines / Oil Prices / → All Tags

Two More Carriers Joining the Capacity Cutting

Both British Airways and Ryanair will cut capacity this winter, joining the ranks of American carriers that have already announced cutbacks because of the escalating cost of fuel. BA chairman Martin Broughton said today that his airline would be making bank if oil still cost $85 a barrel, a price last seen in February. But instead of bragging about handsome profits, he declared that he and his colleagues are in the midst of

Perhaps the biggest crisis the aviation industry has ever known.

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Virgin America / Oil Prices / → All Tags

Virgin America Not Worried about "Perfect Storm"

Virgin honcho Richard Branson declared yesterday that the industry is in a "perfect storm" thanks to high fuel prices and a softening economy. But for its part Virgin America isn't too worried--despite what you may be hearing.

Says spokeswoman Abby Lunardini:

We have no idea where the "rumors" are coming in from, but it is safe to say they are not true.

Abby also reminded us that VA's brand new fleet uses less fuel than the planes at an average airline. Good news for sure: Oil's selling for $145 a barrel!

Related Stories:
· Branson Says Airline Industry Is Real, Spectacular [Jaunted]
· Virgin America coverage [Jaunted]

Richard Branson / Airline Bankruptcy / Oil Prices / → All Tags

Branson Says Airline Industry Is Real, Spectacular

Serial airline entrepreneur Richard Branson channeled a bit of Teri Hatcher's "Seinfeld" character in a recent interview, telling the UK Times that he expects "spectacular casualties" in the industry over the next 12 months.

The mogul went on:

You have the perfect storm--you've not only got the banking crisis and the housing crisis, you've got the soaring fuel prices as well. One of the big American carriers will almost definitely go.

Here's hoping his predictions don't indicate his thinking on the Virgin-branded carrier in the US, about which rumors have recently swirled.

Related Stories:
· Branson Predicts "Spectacular" Airline Casualties [Reuters]
· Richard Branson coverage [Jaunted]

Airlines / Oil Prices / Chris Elliott / → All Tags

The Airlines Have Had It with These Global Oil Markets!

One of the most interesting--and underreported--aspects of Chuck Thompson's book "Smile When You're Lying" was his discussion of Peak Oil and its potential effect on the travel industry. And whether or not you believe the theory that we will soon tap the world's petroleum reserves and begin a long, disastrous decline into a carbon-free future, you can't deny that the price of oil has dramatically increased over the past year.

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Airlines / Oil Prices / → All Tags

Jet Fuel Travel: Will Airlines Start Charging Extra for Gas?

It now costs about $100 to buy a barrel of oil, and that has some airline analysts predicting that fuel surcharges might turn into fuel charges. Think of it this way: Instead of buying a flight, you're in effect renting the airplane seat. The fuel you need to get to your destination would be extra, just like when you rent a car.

Of course, airlines already hedge against price increases, buying up mass quantities of jet fuel at discount. Southwest, for example, is only paying about $50 a barrel for most of its gas. Continental does the same, but only gets a third of its fuel below market rate. United does it differently, adding flat surcharges on tickets to compensate for higher costs.

By removing the fuel charge from ticket prices, airlines would avoid the hassles of betting on petroleum futures. Of course, that'd make shopping for airfares much more difficult and put passengers--rather than airlines--at the mercy of the global energy market.

Mark Ashley at Upgrade: Travel Better doesn't like the sound of that:

This would be awful for consumers, whose ability to predict the actual cost of travel would be flushed down the toilet...The fuel bill on a 7,000-mile trip can change substantially with small shifts in the price of oil. "Low fares" would be a thing of the past, unless the airlines started "free fuel" promotions...

I wouldn't be surprised to see Skybus or Spirit try something like this, since they're already nickel-and-diming their customers and they're known for doing anything to make a buck.

Related Stories:
· US Flyers May Face Separate Fuel Fees [Reuters]
· Will Airlines Start Unbundling Fuel? [Upgrade: Travel Better]
· Maxjet Plays the Scrooge [Jaunted]
· Airlines coverage [Jaunted]

[Photo: Mark Bodenham]