No Love for Passengers? Airlines Hog Fuel Savings

Fuel prices are falling, but airfares are holding steady. Find out why.

If you’ve flown since gas prices started falling, you might have noticed that ticket prices seem to have barely budged.

New reports confirm that trend.

Airline company financial reports show that the four major carriers saved a total of $3.4 billion on fuel during the first three months of this year, CNN Money reports:

Fuel is the largest expense category for airlines. So lower prices shaved their cost by 33 percent, when compared to last year.

The average ticket price for American, United and Southwest, however, fell only 66 cents to $192.39. (The fourth major carrier, Delta, doesn’t disclose ticket prices.)

Airlines didn’t pass on the savings to customers because they didn’t have to. They were able to sell tickets due to a “strong” demand for them, CNN reports. The four major carriers filled about 81 percent of their seats.

And when airlines’ bottom lines fatten, shareholders stand to benefit. Earlier this year, for example, Delta chief executive Richard Anderson told the Wall Street Journal that the company planned to use anticipated fuel savings to pay down debt and reward shareholders. So if you want to benefit from lower airline costs, the way to do it might be to buy a few shares of their stocks. We’ve written about doing exactly that: See When You Can’t Beat ‘Em, Join ‘Em: Buy the Companies You Hate.

A spokesperson for Southwest Airlines tells CNN that the company’s prices are competitive. The other companies did not respond to requests for comment, or referred CNN to the trade association Airlines for America.

The association’s spokesperson, Victoria Day, says customers benefit from lower prices because airlines are using fuel savings to spend more on capital improvements:

Airlines have been reinvesting 85 percent of cash flow from operations back into the product through acquiring new aircraft, refurbishing airport check-in areas/lounges/gates, adding seats to the schedule, initiating new routes and adding staff.

Air travel remains one of the best bargains for consumers.

Despite solid ticket prices, overseas travel is cheaper than it used to be thanks to the strength of the dollar. To learn how to take advantage of that, check out “Never Been to Europe? Go Now, and See More for Less.”

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Stacy Johnson

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