Report explains why higher fuel prices are better for business

Higher oil prices have been good for business, according to a report by an arilines writer. In the past six years, the report says, airlines have overhauled the way they operate to adjust to this new reality by exercising more discipline with things like offering fewer seats. This, he says, ensures airfares are high enough to cover costs. A decade ago, airlines were paying just US $1.42 a gallon for fuel, when adjusted for inflation. Last year, they paid an average of US $3.03 a gallon. Fuel now accounts for more than a third of airlines’ expenses, overtaking salaries, wages and benefits as the single biggest line item. U.S. carriers burned through 16 billion gallons of jet fuel last year at cost of US $48.4 billion. That’s up nearly US 23 billion from 10 years ago – when the airlines consumed 2 billion more gallons of fuel. Mayorowittz explains that thhis is good because high oil prices forced the major airlines to do business differently. They grounded older, gas-guzzling jets. Then they charged extra for checking baggage and raised other fees. More passengers were packed into planes and mergers helped push airfares higher.

Comments are closed.