ewmahle
Posts: 93
Joined: Thu Mar 24, 2005 10:36 am

Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 7:36 am

Whats up all,

So now gas has dropped significantly in the US and ticket prices have not. They were awfully fast to go up when gas went up. Are the airlines trying to gain back some previous loses by pocketing the difference as profit or is jet fuel not any cheaper because I know it is not the same as gasoline.
 
commavia
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 7:38 am

Quoting Ewmahle (Thread starter):
Are the airlines trying to gain back some previous loses by pocketing the difference as profit or is jet fuel not any cheaper because I know it is not the same as gasoline.

Indeed. It's called "capitalism."
 
ewmahle
Posts: 93
Joined: Thu Mar 24, 2005 10:36 am

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 7:48 am

Capitalist bastards....j/k

Hopefully we see a little relief soon. Not that the prices are that outrageous.
 
ikramerica
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Joined: Mon May 23, 2005 9:33 am

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 7:49 am

Quoting Ewmahle (Thread starter):
Are the airlines trying to gain back some previous loses by pocketing the difference as profit or is jet fuel not any cheaper because I know it is not the same as gasoline.

Why shouldn't they? They ate a lot of the cost of the fuel prices and didn't pass it all on to the consumers, which lead to losses that would have been profits with last years prices.

Now they are recouping the "gift" they gave to the consumer. And make no mistake, they were giving us a gift during the peak of the fuel prices by not increasing airfares dramatically.

It's known as "price normalization" where the company absorbs the shifting input prices rather than the consumer. It's not evil or wrong. Companies with long term quality business models can do such things.

Utility companies around america offer this feature for people who'd rather have a fixed cost monthly. HMOs basically work this way too, making you pay for months you don't use healthcare much, while eating some of the costs in the months that you do.

This concept is something that union leadership doesn't understand. They don't see that you need a few quarters of profits to cancel out quarters of losses. As soon as a union sees a profit, they believe they are owed that profit directly, as the "natural state" of all companies, as we all know, should be zero sum...  Wink
Of all the things to worry about... the Wookie has no pants.
 
iowaman
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 7:50 am

Also interesting to note is I don't believe Jet A has dropped as much percentage wise as gas. Gas in Iowa and most of the midwest/east has dropped around 25-30% from the peak prices this summer. IIRC Jet A has only dropped around 10-15%.
 
doug_or
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 7:52 am

Quoting Ewmahle (Thread starter):
They were awfully fast to go up when gas went up.

No, no the weren't. Ticket prices went up when planes filled up. Prices have been going up, but they didn't skyrocket when Katrina sent crude prices up. Nor did they mirror the rise in oil prices that preceded it.
When in doubt, one B pump off
 
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Stitch
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 7:53 am

While gas prices have dropped, load factors have not. More people wish to fly and are willing to pay the same prices (or more) to do so.
 
NWDC10
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 8:25 am

Let the airlines make $$$$$$$$$$$$$$$$$. Robert NWDC10
 
TeamAmerica
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 8:40 am

Quoting Doug_Or (Reply 5):
No, no the weren't. Ticket prices went up when planes filled up. Prices have been going up, but they didn't skyrocket when Katrina sent crude prices up. Nor did they mirror the rise in oil prices that preceded it.

Agreed. The airlines took huge hits from rising fuel costs that were not passed on in ticket prices, at least initially.

Quoting Commavia (Reply 1):
Indeed. It's called "capitalism."

Ditto this, too. Airlines are not a public utility. I don't understand where people get the idea that airline tickets (or gasoline for that matter) are somehow exempt from the basics of supply and demand.
Failure is not an option; it's an outcome.
 
charlienorth
Posts: 1054
Joined: Sat Jun 10, 2006 6:24 am

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 8:54 am

They're learning to run a business instead of fleecing the employees.
Work hard fly right..don't understand it
 
vv701
Posts: 5780
Joined: Fri Aug 19, 2005 10:54 am

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 9:05 am

How many airlines have done a Southwest by buying in the futures market but at the top of the market in the expectation that gas prices would go still higher?
 
PanAm747
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 10:17 am

In 1987 when I took my first "real" vacation, I paid $238 for a round-trip ticket from LAX to JFK and back.

Nearly twenty years later, I can still, within a few dollars (and some careful looking), manage to do the same thing for the same dollar amount.

Except that adjusted for inflation, ticket prices are WAY down. In fact, they are bankruptcy level low.

When the price of fuel went up, airlines couldn't really raise prices to cover the costs of fuel. Concession after concession after concession, and it still wasn't enough. Customers were willing to pay $3.50 per gallon of gas here in Southern California, but raise ticket prices $10? You'd have thought the apocalypse was coming!!

Airlines have been giving away the store. Now that fuel prices have dropped or at the very least stabilized, the airlines need to recoup their losses.

Granted, I am still going to look for the best deal - and I don't think anyone is volunteering to pay more just to help the airlines - but for airlines to stay viable, they have to make more than they pay out.
Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
 
bond007
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 10:28 am

Quoting PanAm747 (Reply 11):
When the price of fuel went up, airlines couldn't really raise prices to cover the costs of fuel. Concession after concession after concession, and it still wasn't enough. Customers were willing to pay $3.50 per gallon of gas here in Southern California, but raise ticket prices $10? You'd have thought the apocalypse was coming!!

Airlines have been giving away the store. Now that fuel prices have dropped or at the very least stabilized, the airlines need to recoup their losses.

Perfect post!

It's about time the airlines simplified their pricing programs...charge fares that actually cover the cost of the flight...and perhaps make a dime at last.


Jimbo
I'd rather be on the ground wishing I was in the air, than in the air wishing I was on the ground!
 
stirling
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RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 10:28 am

I hope they don't lower prices one penny! Hopefully, that way, maybe airlines like NW and DL can get out of BK sooner, and order some new aircraft!
AA and CO too!
Delete this User
 
ikramerica
Posts: 13772
Joined: Mon May 23, 2005 9:33 am

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 10:33 am

As another example:

My friend runs a coffee shop/cafe. Usually, when cost of inputs fluctuate individually, he either makes more or less money on a menu item. Sometimes, he's making nothing on a product for a month, since raising and lowering prices constantly is not easy to do (reprogram cash register, reprogram night shift employees, reprogram customers to not over react). One would assume that on certain items, he will take a loss some weeks.

Only when all cost of input goes up does he raise prices, like this year. First raise in 2 years, but he had to due to input costs, which went up due to gas prices, mostly. Now, even if those input costs drop a bit, I don't expect him to lower his prices. Customers have ADJUSTED, and he needs to make up for the months of little to no profit. He has a wife and baby to take care of.

But if prices were to keep going up and up and up with no justification, I wouldn't be so understanding.

Back to airlines, to expect your ticket price to be tied directly to fuel prices is silly. Fuel is only one input, and normal fluctuations of fuel prices is something that is built into the ticket price (or should be) as an average. This summer, the fuel prices held far above average after being above average for the winter and last summer, etc. So one can't expect an airline to just lower prices as soon as fuel drops to the planned AVERAGE price! 12 months at $20 a barrel, that's when you might, might see airfares drop a bit...
Of all the things to worry about... the Wookie has no pants.
 
flyingnanook
Posts: 817
Joined: Thu Jan 15, 2004 4:41 pm

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 11:38 am

I vaguely remember reading something regarding this in the local paper, I think. It might have been something on the internet.

When gas prices spiked this summer, the local refinery in North Pole (which supplies most of the jet fuel for ANC and all of it for FAI), increased production of gasoline and decreased the production of jet fuel (and other products) to compensate. The reason they shifted their focus to gasoline is that when gas prices go up, more people suffer the economic impact than when jet fuel prices go up. By producing more gasoline, it keeps the price from skyrocketing too much, due to supply and demand stuff. So this summer, gas didn't spike quite as badly in Alaska (Fairbanks at least) as it did in other parts of the country. I don't fully understand those concepts because I'm no economist.

I would think that other refineries redistributed the percentages of their products similarly. And this could cause the price of gasoline to come down faster than that of jet fuel. And with the price of gasoline dropping, then the refineries can go back to the normal percentages of their products, which then could result in more jet fuel being produced and in turn, the price of jet fuel will decrease.

But this is all speculation, based on a fuzzy memory of a local newspaper story (or maybe the internet).
Semper ubi sub ubi.
 
swissy
Posts: 1481
Joined: Fri Jan 07, 2005 11:12 pm

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 12:17 pm

Quoting Ewmahle (Thread starter):
So now gas has dropped significantly in the US and ticket prices have not.

If you are talking about the extra "fuel charge" you are right.

If you talk in general, it would not drop as "fuel" is as a part of the calculations and demand is still strong (flying pax)= high load factors, no need
to adjust ticket price.

Cheers,
 
Boston92
Posts: 2553
Joined: Wed Aug 09, 2006 6:56 am

RE: Gas Prices Go Down, Ticket Prices Do Not

Tue Oct 03, 2006 1:09 pm

Fares are rarely raised because of fuel prices. I mean maybe an airline may raise all prices 5% or something, but regardless of fuel prices, when booking a flight 6 months in advance, be prepared to pay 200-300% more than if you wait until 1-2 months until flight date.
For example, LAX-BDL in MAR on UA-500.00 dollars USD
same flight within the next couple of weeks/months-263.00 dollars USD
"Why does a slight tax increase cost you $200 and a substantial tax cut save you 30 cents?"

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