Fuel prices are down - why not air fares?

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

The airline bandits have not even reduced their ''fuel surcharges''. Here is a good article on the problem:

http://elliott.org/blog/gas-prices-arent-airfares/

The short answer is that mergers have created an oligopoly, the same factor that is destroying FF programs.

[Hoc Super Moderator Find all posts View Profile Close Hoc]

I find it annoying that airfare prices now seem to be about 150% of what they were only four years ago. This certainly explains it, but it doesn't justify it.

[bigfrank Administrator Find all posts View Profile Close bigfrank]

From what I recall, When fuel first started going up years ago. The airlines were still charging the same amount. Reason back then was that they buy there fuel in bulk. So they have about an 8 month stock pile. So IMO I think we will have to wait for the airlines to buy at today's prices and get it discounted 8 months from now.

What I do not understand why has the taxis not gone down?

[chriskre Super Moderator Find all posts View Profile Close chriskre]

I've seen some cheap airfare deals lately.
Recently I flew to BWI from MIA for $106 on AA.
I originally put the flight on hold at $120 thinking it was a good deal
and when I went in to confirm it I got the dreaded "the price has changed
since you put this on hold" message.
And when I clicked to see the price it had gone down to $106.
Cost me more to take the shuttle to Frederick than the airfare from FL.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Guess it depends.

Flights on Allegiant from up there to down here have been as low as $52. They have even been sending promotional emails, which they normally don't have to do this time of year.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

Guess it depends.

Flights on Allegiant from up there to down here have been as low as $52. They have even been sending promotional emails, which they normally don't have to do this time of year.

LCC's are a different world. EasyJet, RyanAir, WizzAir, etc. are in the same ballpark on the other side of the pond but have MUCH bigger networks. I would like to see an airline that runs on their model really take off in the US.

Most of the European LCC's have never played the fuel surcharge scam, and I remember getting on a SkyEurope flight and reading an editorial in their inflight magazine blasting the whole concept of fuel surcharges as a fraud perpetrated by legacy airlines.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Flights on Allegiant from up there to down here have been as low as $52. They have even been sending promotional emails, which they normally don't have to do this time of year.

Just booked Springfield, MO to St. Pete, FL for March for $72.

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

Almost all businesses base their prices on what the market demands, not the cost of production. They go out of business when the price they can get in the marketplace exceeds the cost of production. They make money when the reverse is true.

In many markets, the normal response of a business to a decrease in costs would be to bring more capacity to market - in the airlines world that would mean increasing flights and capacity to sell more tickets. However, with the cost cutting and retrenchments of the last decade the fleets are essentially fully deployed. There aren't many jets and flight crews sitting around, undeployed and available to immediately expand capacity. Hence prices don't move because they are at a point where the supply meets the demand. The cheaper fuel doesn't alter than intersection, so the prices don't change.

Now, if fuel prices continue to stay low, then it will behoove airlines to start to expand capacity. Operational jets that are sitting in storage on runways in desert airports will be prepped and brought back into service. More flight crews will be added; some pilots will delay retirement or come back from retirement. Pilots flying low capacity regional jets will move up to flying larger jets, etc.

That's the point at which prices will fall - when more capacity is made available, to push down the intersecting point for supply and demand. The other that will cause prices to fall is if demand drops off, such as would happen if a recession sits in.

But as long as demand stays at a point that meets the airlines revenue optimization models, prices aren't going to budge.

The exceptions will be for some specific inter-city markets where there is available capacity. In those markets it will make sense to slash prices.

******

I should add that what I outlined above is how I run my business. I sell my services for what I can get in the marketplace. If I find a way to reduce my costs by 20% I don't cut my price schedule by 20%. I keep the extra revenue. My customers don't care what my costs are. They only care about whether the value I deliver is worth the price they pay.

Conversely if my costs go up by 20% I can't go out and increase my pricing by 20%. Again my customers don't care what my costs are. They only care about what my price is relative to my competitors.

******

For some businesses, decreases in costs get passed onto customers right away. That happens when there is reserve production capacity that can easily be brought on line, and I can profitably grab market share (or defend my market position) by lowering prices. That might be the case in a mining operation, for example, where it's easy to increase operating hours, add more rail cars, and add sales quickly due to lower cost.

******

As regards fuel surcharges, the airlines were able to add them because they could do so and still fill their planes. If the added cost of the fuel surcharge had caused revenues to plummet unacceptably, the airlines would have dropped the surcharge immediately.

The best way to express displeasure with pricing is with your pocketbook. That's really the only thing that businesses - yours, Steve, as well as mine - really listen to.

[billymach4 Super Moderator Find all posts View Profile Close billymach4]

From what I recall, When fuel first started going up years ago. The airlines were still charging the same amount. Reason back then was that they buy there fuel in bulk. So they have about an 8 month stock pile. So IMO I think we will have to wait for the airlines to buy at today's prices and get it discounted 8 months from now.

What I do not understand why has the taxis not gone down?

Bingo! Same question here?

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

Apparently the airlines are doing extremely well, so much so that they are now bringing back in flight snacks.

[lawren2 Malibu Beach Barbie & A Super Moderator Find all posts View Profile Close lawren2]

I haven't flown any flights with tons of extra seats lately. Flight costs have increased by an average $100 per round trip on my regularly flown routes. Mostly trans-con.

Jet Blue for all intents raised their prices last year by adding baggage fees. They were always a smidgeon higher than other airlines but I would justify it saying I got a "free" checked bag. The result is it takes a lot longer to board or deplane and I go back to shopping aimed more towards convenience and price.

I seriously doubt we will see any consumer pass through on lower fuel prices. The airlines have been attempting for years to raise prices. The "savings" will be kept in-house.

[lawren2 Malibu Beach Barbie & A Super Moderator Find all posts View Profile Close lawren2]

Just a few days after Uber slashed its fares in the Big Apple, it may be a bit difficult to find a ride on its app in the city at the start of the week.

http://www.nj.com/news/index.ssf/201...wer_fares.html

Taxi drivers protest Uber at Newark Liberty International Airport
More than 100 taxi drivers formed a caravan through Newark Liberty International Airport to call for Uber to be regulated.
However, its drivers, unhappy with the lower fares, have planned a protest in Queens to "return respect and power to drivers."

Drivers are urging others to turn off the Uber app, boycotting the company's new fares by taking Monday off.

Led by the United Drivers Network, the protest is demanding that Uber take a fee cut, claiming the reduction in fares has not increased business or reduced wait times.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

The problem in the airline industry in lack of competition, due to the mergers that have occurred, Consumers have gotten screwed as a consequence. We now have an incestuous ogligopoly

Almost all businesses base their prices on what the market demands, not the cost of production. They go out of business when the price they can get in the marketplace exceeds the cost of production. They make money when the reverse is true.

In many markets, the normal response of a business to a decrease in costs would be to bring more capacity to market - in the airlines world that would mean increasing flights and capacity to sell more tickets. However, with the cost cutting and retrenchments of the last decade the fleets are essentially fully deployed. There aren't many jets and flight crews sitting around, undeployed and available to immediately expand capacity. Hence prices don't move because they are at a point where the supply meets the demand. The cheaper fuel doesn't alter than intersection, so the prices don't change.

Now, if fuel prices continue to stay low, then it will behoove airlines to start to expand capacity. Operational jets that are sitting in storage on runways in desert airports will be prepped and brought back into service. More flight crews will be added; some pilots will delay retirement or come back from retirement. Pilots flying low capacity regional jets will move up to flying larger jets, etc.

That's the point at which prices will fall - when more capacity is made available, to push down the intersecting point for supply and demand. The other that will cause prices to fall is if demand drops off, such as would happen if a recession sits in.

But as long as demand stays at a point that meets the airlines revenue optimization models, prices aren't going to budge.

The exceptions will be for some specific inter-city markets where there is available capacity. In those markets it will make sense to slash prices.

******

I should add that what I outlined above is how I run my business. I sell my services for what I can get in the marketplace. If I find a way to reduce my costs by 20% I don't cut my price schedule by 20%. I keep the extra revenue. My customers don't care what my costs are. They only care about whether the value I deliver is worth the price they pay.

Conversely if my costs go up by 20% I can't go out and increase my pricing by 20%. Again my customers don't care what my costs are. They only care about what my price is relative to my competitors.

******

For some businesses, decreases in costs get passed onto customers right away. That happens when there is reserve production capacity that can easily be brought on line, and I can profitably grab market share (or defend my market position) by lowering prices. That might be the case in a mining operation, for example, where it's easy to increase operating hours, add more rail cars, and add sales quickly due to lower cost.

******

As regards fuel surcharges, the airlines were able to add them because they could do so and still fill their planes. If the added cost of the fuel surcharge had caused revenues to plummet unacceptably, the airlines would have dropped the surcharge immediately.

The best way to express displeasure with pricing is with your pocketbook. That's really the only thing that businesses - yours, Steve, as well as mine - really listen to.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

The fuel surcharge that the airlines add are basically a fraud. They are arbitrary, and not related to either the amount of fuel a particular aircraft type uses over a given route or to the price of fuel. They are an unfair and deceptive business practice. One thing I like about the European LCC's is that most of them have never played this fraudulent game. In fact, I remember a great editorial in the inflight magazine of SKyEurope that denounced the whole practice of fuel surcharges on air tickets..

Fuel is not an optional extra. It is an essential part of the basic product. An airplane will not fly without it. What's next, a pilot surcharge?

[chriskre Super Moderator Find all posts View Profile Close chriskre]

Apparently the airlines are doing extremely well, so much so that they are now bringing back in flight snacks.