Musings of an armchair economist...

Airlines hedge fuel costs, but at some point higher prices will catch up to them. If the spot price of jet fuel rises 30 cents, they have to assume that eventually they will be paying that rate. They can hold off a price increase for a while, but only until it is very obvious that the spot price will not be relaxing.

I want to say that I once heard a 757 burns approximately 2.5 gallons of fuel per mile (on a 1,500 mile trip). Not too long ago the airlines were paying about 70 cents a gallon for fuel. Consequently on a theoretical 1,500 mile trip they burn up $2,625 worth of fuel. If fuel rises to a dollar, their fuel bill is $3,750.

Now assume a typical 757 holds 160 people, and its owner averages a 70% fleet load factor. The fuel increase of $1,125 has to by divided by 102 people (probably less if you factor people flying on free tickets). What you end up with is an increased expense of $11.03 per person.

I'm not anywhere sure of the fuel consumption rates, and the actually price the airlines are paying for it. If anyone has more objective numbers please post them. Nevertheless, it is not difficult to see where a $20 round trip number starts to make some sense.