Lower prices at pump do not mean lower airfares

The price of crude oil dropped four per cent last week, closing at just over $57 per barrel. Now that oil prices have fallen significantly, airlines are experiencing increasing pressure from air passengers to lower or do away with fuel surcharges that were introduced during the summer when jet fuel prices soared to their highest levels ever.

As consumers see gas prices drop at the pumps, carriers will continue having a difficult time justifying the surcharges they introduced, according to Stuart Klaskin, an airline consultant based in Coral Gables, Florida.

The analyst added that even if airlines reduce or remove fuel surcharges, it is unlikely that the cost of air travel will become cheaper. Even if airlines do cut fuel surcharges, Klaskin expects a rise in basic airfares to make up the revenue difference.

Although this may sound like maneuvering on the part of the airlines, but as the economy continues to soften, travel demand decreases and so does airline revenue. Klaskin argues that carriers will have to keep airfare revenue up to survive in the current economic client. What this means is that airlines will likely resist the temptation to reduce airfares in times of weak demand.

He suggests that a better option for airlines is to keep reducing capacity into 2009 in order to keep fares up. “We’re going to see how much backbone everybody’s got in providing a smaller, but more-profitable, industry,” Klaskin added.

Thanks to www.travelmole.com for the above quotes, for more information on this article please visit their website.

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