words mary von aue | image basheer tome
Fuel is cheap. Very cheap. Like, disrupting entire countries from its sweeping devaluation of the commodity cheap. Leaving industries on the brink of collapse cheap. Even, saving airlines billions of dollars cheap, you might say.
But how about discounted airfare cheap?
The price of oil has been on a steady decline since last summer, and today we’re enjoying a rate of around $48 a barrel, a huge break compared to June 2014, when the going rate reached $120. Since then, airlines have been able to buy jet fuel like it’s from a yard sale, roughly 40% less of the cost it was last year. As a result, airline profits have jumped to unprecedented levels.
First quarter reports show that Southwest Airlines tripled their profit to an incredible $453 million after having saved $400 million in fuel costs. American Airlines earnings are even more impressive. They’ve made $932 million, mostly thanks to the $1.36 billion they’ve saved in fuel expenses.
So did the average cost of a airfare also drop? Of course! Airline have gone ahead and cut some of the costs two whole dollars.
Two dollars. The average flight is only two dollars cheaper. With that kind of savings, you’re half way there to splurging on those in-flight peanuts that are no longer complimentary.
Despite the sweeping clearance sale that has aided airlines across the globe, we’re still paying for carrier-imposed surcharges that often double the price of the base airfare. As Rick Seaney demonstrated in USA Today, a flight from New York to London will come with an average base fare of $403 and additional surcharges of $458. More than half of the cost of airfare is set aside just for fuel costs, but most airlines haven’t decreased these surcharges to reflect new oil prices.
While some airlines did buy oil futures and may have paid higher prices last year, they’ll continue to profit from the current pricing. Qatar Airways, British Airways and Australia’s Qantas Airways are among the few to have cut fuel surcharges, but none of the US based airlines have followed suit.
Will they? Nah. As long as flight demands remain high, airlines can pocket the profits. But next time you order a mini-pack of peanuts in coach, be thankful that they’re practically half-off.