Escape Hunter Stream Oil's Price is Down, Could Flights Cost Less in 2015?

Oil's Price is Down, Could Flights Cost Less in 2015?

Oil's price has sunk to a 5-year low level. It has never been so low since early 2009.
Will flights become automatically cheaper right now?
Should we the travelers rejoice at this price drop?

It sounds like a natural consequence, since airplanes use kerosene, the ticket prices should drop as well. But things are a big more complicated.
(You might be rubbing your head, having one of those "I thought so, it would be too nice to be true" moments).

I looked into this issue of cheaper oil, cheaper flights...

Unfortunately, things are more complicated, because as oil's price goes down, other things may go up - like certain expenses.
For instance, in Canada, the fall of oil's price in terms of US dollars wasn't at all a reason to rejoice, because the Canadian dollar fell (as this newspaper reports).

Operational costs are rather complex in case of airlines. Having a weakening national currency on behalf of cheaper fuel might signify a "double edged sword" situation.

Cheaper fuel is good news to the industry anyway and perhaps some airlines will use this opportunity to bring their fuel surcharges lower. This could affect the prices of their tickets.

But this will not happen suddenly, especially not if the cheap oil period will be short-lived.

(The extreme situation of highly expensive oil and its effects on flight prices was previously published in this Escape Hunter article).

Although the fuel surcharge is not applied by all companies, it's obvious that fuel's price is indeed included in each ticket's price.

This article is telling us, the fuel costs cosntitute 30-33 % of the airline industry's expenses.

So, in theory, discounting based on the fuel's price could have a tremendous effect on the ticket's final price.

Obvious benefits to airline travelers... But why would the airlines resort to price-cutting?

Just because fuel has gotten cheaper doesn't mean the airline has to reduce the airfares.

Airlines primarily rely on demand for their tickets. As long as demand is high enough, they will not cut prices.

But, suppose a carrier is facing financial difficulties and finding it hard to cope with stronger competitors. They would probably be the first to trim the fares.

Price-cutting is a delicate issue and, should some airline engage into such activity too intensely, it could trigger a price war.

Further, you can find my tips on how to find cheap tickets for flights and you might be better off than just sitting back and hoping for the best!

Comments

comments powered by Disqus