Disaster for Airlines: Oil Prices

Share
Copy

The pros and cons of deregulation? The cons are easy: airlines feared losing protected routes and prices. Smaller cities were concerned about losing service. And unions worried about losing pay and losing jobs. Much of this has happened, but the main pro in the deregulation debate also happened.

Ticket prices went down.

For example, in 1977 you would pay $86 to fly from Philadelphia to Pittsburgh; in today's money, that's about $295. But you don't pay $295 today; last week I found a fare from Philly to Pittsburgh for just $112. Great, right? But wait a minute: how can an airline survive at that price? Forget oil prices reaching $200 a barrel -- how can an airline survive such prices at the current price of oil?

Well, as noted, many are not surviving; so, the airlines are desperately adding fees ($25 to check that second bag) and they're slapping fuel surcharges onto the prices of their tickets, which has meant an additional $130 above the base ticket price for hundreds of thousands of fares. And notice that the $130 fuel surcharge is currently higher than the price of a barrel of oil.

The economics of airlines at $200 oil are upside down (I sometimes have bizarre nightmares about passengers trying to avoid the extra bag check and fuel surcharges by squeezing a barrel of oil into an overhead bin).

Some say the airline industry is disappearing with oil at $120 a barrel. Can it come back? Can we make the industry work again? That is the question buzzing through the management offices at every airline.

But does re-regulation make sense? I don't think so. And it would be ironic if we went back to those days, especially since Europe and Russia have taken the plunge into the free market (with varying results), but if Goldman Sachs is correct -- and I believe they are -- oil will be a nasty part of the airline equation for years to come.

Now, I'm not saying Americans necessarily have a right to cheap airfare, but I do believe we should always have the right to the relatively cheapest airfare, and bargains can still be had. Savvy shoppers just have to dig deeper, and be more flexible about travel planning than ever before (some of the best deals around today require that you travel literally within a few days of your purchase).

Someone said not too long ago that what the airline industry really needs is the imagination and vision of new aviation heroes -- someone like Howard Hughes, perhaps, or Southwest's plain speaking Herb Kelleher, or maybe Virgin's Richard Branson -- now, there's a man with ideas.

Or maybe the situation is so dire that we need super-heroes -- unfortunately, Iron Man is busy with his new movie. In the meantime, though, I think we need to do the same thing for leisure travel that we're doing in all areas of our lives during these troubled economic times, and that's using every tool at our disposal to make the most intelligent purchases we possibly can.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Rick Seaney is one of the country's leading experts on airfare, giving interviews and analysis to news organizations, including ABC News, The New York Times, The Wall Street Journal, Reuters, The Associated Press and Bloomberg. His Web site FareCompare.com offers consumers free, new-generation software combined with expert insider tips to find the best airline ticket deal.

-- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008. -- This embed didnt make it to copy for story id = 4847008.
Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...