Say, did you hear those rumors about airfare wars which were going to be bringing down ticket prices? That story wasn’t entirely #FakeNews because there were some discounted fares over the past couple of months, but they mostly only applied to flights to Hawaii, brought on by new service to the islands from Alaska Air and United. There were hopeful suggestions that similar changes might be hitting the entire market, though. Great news, right?
Not so fast. The management at American Airlines stepped up this week to let everyone know you can just forget about it. Not only won’t regular, domestic ticket prices be coming down, they will actually be going up. (Travel and Leisure)
Flight passengers can expect ticket prices to go up this year, according to one airline CEO.
Talk of a fare war among airlines spiked this week after United Airlines announced it would add extra flights and larger aircrafts in order to compete with low-cost carriers. But American Airlines CEO Doug Parker put speculation to rest during the airline’s earnings conference call Thursday, saying ticket prices would likely become more expensive this year. According to Parker, airfare will go up due to higher oil prices, USA Today reports.
“Fares are too low for oil prices this high, and over time you’ll see that adjust, but it takes time,” he said.
Parker said crude oil prices have risen to $70 per barrel from $50 over five months and are currently at a three-year high. He said American, the world’s largest carrier, will have to increase prices because at the current rate, the airline stands to lose $1.8 billion on fuel this year alone.
Should you believe that prices will be going up? Absolutely. That’s almost a given. But before you buy into Parker’s stated reasons you should look more closely at realities on the ground. (And in the skies, obviously.) First of all, crude oil prices are not where he’s claiming, at least not across the board. You can visit the Oil Price website to check for yourself. Saying that prices have surged to more than 70 dollars per barrel is true if you’re only looking at the high benchmark, Brent Crude price. But Brent Crude is the price average for the best sweet, light crude taken from 15 different North Sea oilfields. It’s always far up on the scale. If you look at the WTI index, US Crude, Mars US or the OPEC Basket prices you’ll get a more solid idea, and they’re still trending below 60.
Prices definitely have risen more than 40% on average in the past six months, however. Bloomberg has a decent layman’s explanation of why and where they might be going in the future. There are a few market analysts who are hinting that prices could hit 80 dollars this year, but that’s driven almost entirely by market jitters about possible war or other disruptions to the pipeline. Also, output from Venezuela and Libya have plummeted (for obvious reasons, particularly with Venezuela imploding at the moment), putting a bit more upward pressure on prices. But most analysts seem to think that prices will stay roughly where we are now on average, so American Airlines shouldn’t be crying poverty over that.
The real problem, as we’ve discussed here more times than I can count, is that there is still virtually no competition in the airline industry except in a few niche markets like service to Hawaii. The airlines have consolidated (with government permission) into a few remaining large carriers and they divide up territory like mob bosses settling a turf war. They have no reason to lower prices, so why should they? And don’t expect them to stop shrinking the size of seats, available leg room and pretty much anything else they can do to make you miserable when flying coach. That’s not a bug… it’s a feature. They want to motivate you to pay double or triple for upgraded accommodations which aren’t quite so torturous.
So save up some extra pennies if you plan on traveling by air in 2018, folks. You’ll be shelling out more for the same, miserable service you’ve grown used to.