Airlines Raise Ticket Prices as Fuel Costs Surge Link: https://www.wsj.com/artic

Question

Airlines Raise Ticket Prices as Fuel Costs Surge

Link: https://www.wsj.com/articles/airlines-raise-ticket-prices-as-fuel-costs-surge-1528310136

Airlines have raised ticket prices due to rising fuel costs. In fact, fuel costs have increased over 50% in the past year. Delta claims that with the increased fares, it could take up to 12 months to recoup the money spent on fuel. The average airline ticket has fallen over the past four years due to a drop in fuel prices. An analyst at JP Morgan suggested that airlines should add surcharges instead of raising fare is it would make the recouping process faster. It should be noted that fuel surcharges are not allowed on domestic flights. The surcharges do pose an issue for corporate travelers as surcharges are more difficult to account for and would prefer the increased fare. Most of the airlines are confident that their businesses can survive the fuel cost surge as they expect it to be temporary.

can you please help ansewring the following:

1) If airlines are losing money on fuel costs, would it be easier on consumers for the airlines to raise prices in other areas (luggage, snacks, etc.)?

2) Would it be beneficial to temporarily suspend less popular routes in order to keep prices low?

Explanation / Answer

1) Fuel cost is one of the major expenses that the airline company has to incurr. It has led to increase in the ticket prices already. If the airlines company decides to raise the prices in other areas like luggage, snacks etc then it will become even more expensive for the passengers. They will have to spend more money on their travel which might make them upset. It is therefore not advisable to raise the price of luggage, snacks etc. The increase in ticket fares can be attributed to the rise in fuel costs but to increase the price of luggage and snacks is unreasonable and also unethical. Moreover, if the airlines company really wants to recover the money that it is spending on fuel then increasing the airline tickets is the best way as not many people would prefer snacks if the charges are increased. Also the luggage is charged for only if it crosses a maximum limit, passengers can plan their luggage such that they can avoid the excess charges. So, not everybody will pay the excess money in form of charges for luggage and snacks.

2) No, it would not be beneficial to temporarily suspend the less popular routes. This is because, these are the routes in which passengers will travel more and so they will definitely purchase the air tickets even though the ticket prices have raised. The airline company will earn more through these routes.

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