Airline fare hikes blamed on rising fuel prices
In the sixth such move since the first of the year, most airlines have raised their ticket prices. This recent $10 increase in standard fares is particularly significant because Southwest, usually a holdout, followed suit. The increase is being blamed on rising oil prices.
The rising price of an airline ticket
According to airline industry reports, the average cost of an airline ticket has increased by $60 this year. A ticket that would have cost $200 on Jan. 1, 2011, now costs $260. Not all airlines follow suit during price increases. Unless all airlines raise prices, the increases usually go back down. This latest $10 increase, however, was followed by Southwest Airlines, traditionally a holdout.
Low-cost carriers and fuel costs
Southwest Airlines is one of several low-cost airline carriers in the United States. Traditionally, Southwest Airlines has avoided many of the fees and rate hikes that larger airlines have undertaken, in an effort to keep customers. JetBlue and AirTran are also low-cost carriers that attempt to keep their prices low. These lower profit margins, however, open the carriers up to more price volatility. When the price of a barrel of oil goes up by $10 to $20, the airlines often raise their per-ticket price by a similar amount. The CEO of Southwest pointed out that Southwest will likely spend $1.3 billion on fuel in 2011, which is three times the total net income of Southwest in 2010.
The increasing cost of travel
As airlines are raising their fares, travel in the United States in general is getting more expensive. When individuals have long distances to travel, they are left with relatively few options. Airlines are the most obvious. Driving is also an option, though the rising cost of fuel can often put the price of a long-distance trip relatively close to that of an airline ticket. Bus service is also experiencing an increase in cost, thanks to rising oil prices. Rail travel is still a viable option in some areas of the country, but a train ticket that was $50 in 2008 is now $150, and service to much of the West is spotty. High-speed rails are still more theory than practice.