RooseveltL

Great job airlines.. Fuel price drop, capacity at high %, profits (from fees) are increasing across the board and let us throw in base fare increase - just to be greedy.

http://www.cnbc.com/id/102105286#.

rjque

Supply and demand sets airfares, not the cost to provide the services. Oil prices have no direct effect on air fares. Demand is up, supply is down (thanks in part to mergers), so prices go up. Not sure why this is surprising to anyone.

RooseveltL

I'm not sure I agree with this statement as in 2011 airlines raised fares 4x in the 1Q to balance out fuel spikes. The same happened in 2012. They specifically added a fuel surcharge for international routes but domestic it was incremental increases to base fare.

Are you claiming they lied or they have since reduced airfare

nux

This is relatively simple economics and supply/demand, and shows that airlines are not in perfect competition but closer to an oligopoly.

Higher costs to airlines will lead to higher prices to consumers, but lower costs airlines will not necessarily lead to lower prices to consumers.

Also remember that airlines hedge against the price of fuel, so the spot price for fuel may have reduced recently but most airlines have likely already determined the cost of their fuel for the next year or more.

Dieuwer

I wonder where the breakpoint is for consumers.
Last weekend I took a trip to Las Vegas, but thought the airfare, hotel, and dining to be VERY expensive. I can afford to pay $700 rt for a flight and $50 pp to dine, but I am not so sure about the average american.
Eventually, something must give: either wages go up substantially, or many will not be able to afford going on vacation anymore.

obscure2k

I believe that the Travel News Forum is a better fit for this thread.
Please follow there.
Thanks..
Obscure2k
TravelBuzz Moderator

GUWonder

Vacation patterns will change to include forms of vacation that the middle middle and lower middle class can afford. The richest 5% of US households will fly somewhat less for non-VFR vacations, but the richest 1-2% will fly about as much as already takes place.

rjque

Airlines charge the highest price the market will bear, regardless of their costs. They implement fare increases whenever they think the market will bear it. If fuel has recently increased in price, they will generally blame the increase on fuel costs, even though costs are not the issue. This is why you never see fares come down when fuel comes down.

Dieuwer

The richest 1-2% fly their own planes. Every other carrier in the US exists by the grace of the middle and lower class.

GUWonder

If only it were so.

Yet the vast majority of US households in the top 1-2% of income earners don't have a member who flies their own planes. And even a majority of US households in the top 1-2% by asset value don't have a member who flies their own planes.

Are you even familiar with how few people in the US are certificated to fly on their own in the US? Once you look into the data about such persons, it ought to become increasingly clear that many of them aren't in the top 1-2% of households by either measure.

Dieuwer

I guess I meant private planes. Not necessarily piloting a plane or owning one.

GUWonder

The vast majority of US households in the top 1-2% by income have no members who flew by anything but common carriers last year. The notion that the majority of even the top 1-2% of income earners fly by private planes -- assuming you are talking mainly about planes not operated by the publicly-traded common carriers in the US -- is one built on a misunderstanding of national demographics and on the annual purchase habits of US persons in the discussed income range.

nookanaya

The 98th percentile by gross income makes roughly $375k. I would agree that not many people making $375k fly private. The 50th percentile makes about $40k.

I would not be surprised if airfare correlates well with macroeconomics. S&P 500 hit a record nominal high this year so I don't think it's surprising that airfares would as well.

Dieuwer

Then where IS the breaking point for the average consumer? $500 NYC-MCO? $1000? $2000 pp?

piper28

For me it was the $900 rt from DTW to FLL that I was looking at for christmas this year. That's a fare I routinely get for $300-$350, even around holidays. I'm driving down this year and flying back (on a one-way that's still higher than my normal round trip). If I didn't have the extra days to be able to drive, I would have canceled the trip.

I couldn't even imagine doing it with kids these days. I know a guy I work with hasn't flown in quite some time because of the costs of flying his family (total of 5).

For all that the business travelers sneer at the average person that's flying, those planes aren't going anywhere unless they're on that plane too, even if they're not paying as much. There just aren't enough business travelers to fill enough seats to make it work (although I suppose the airlines could just start flying commuter planes everywhere, maybe that'd work).