Rise in Jet Fuel costs may Push Airfares higher

The price of jet fuel has surged more than 50 percent in the past year causing carriers to raise ticket prices and cut capacity if fuel costs continue to rise.

Delta Air Lines, the nation’s No. 2 carrier, has cut its profit forecast because of the sharp rise in fuel prices. As stated by the Wall Street Journal, Delta said on Wednesday that it could take six to 12 months to recoup the extra fuel costs via more costly tickets.

Average domestic air fares have fallen for the past four years as carriers handed most of the fall in oil prices back to passengers, However, now higher fuel costs forces carriers to decide carriers to decide how much can be passed on directly to domestic fliers through higher fares without dissuading too many travelers.

Brent crude, the global oil benchmark, is up 12 percent closing in around $75 a barrel this year.

When oil prices hit records high a decade ago, carriers added fuel surcharges to airline fares. A few years after, oil prices dropped and the surcharges slowly disappear.

United Continental Holdings Inc. President Scott Kirby believes with the strong summer demand, he feels good about their ability to pass through the increase in fuel price. Carriers are pushing through a series of small increases of between $2 and $5 per flight and that’ll help United recover about 75% of the higher fuel prices. Adding surcharges is better for profits than higher base fares, so carriers can quickly recoup higher fuel prices.

Industry experts predicted that travelers flying internationally, booking business and economy seats, and flying less competitive routes could expect to pay more during the fall. They may also have less flight options to choose from. This summer may be the last time airfares are at a decent price.

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