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Airfares Are Chasing Oil Prices Higher

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http://www.nytimes.com/2011/02/24/business/24fare.html?_r=1&ref=business

Airline passengers should prepare themselves for sticker shock this year.

As the carriers have tried to keep up with rapidly rising oil prices, they have already increased their fares four times since the start of the year, compared with only three increases for all of 2010. The airlines have also raised some of their fees, imposed summer peak-time surcharges and added hefty fuel surcharges on international flights.

Even traditional low-cost carriers that have long undercut their rivals are joining in. Southwest Airlines, for example, which usually resists industrywide fare increases, participated in several rounds, including one this week.

While the rising ticket prices have matched the steady increase in fuel costs in recent months, the turmoil in the Middle East has sent oil prices sharply higher. That surge now threatens to derail the airline industry’s fragile recovery and may lead to even more surcharges. At today’s prices, fuel accounts for about 40 percent of the industry’s costs, up from about 30 percent just last year.

As a result of the uncertainty in the oil markets, airline stocks extended their losses on Wednesday, after Tuesday’s steep declines. Airline stocks are down 11 percent just this week.

The airlines have few options to deal with their rising costs. Most carriers were already hedging some of their fuel purchases to protect against sudden price increases. They can also look for more fuel-efficient planes, but that requires billions of dollars in investments and takes years. In the meantime, they have little choice but to pass on costs to travelers.

4 increases since the start of the year! This is almost sounding like the start of a hyperinflationary event where everything spirals out of control very quickly.

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http://www.nytimes.com/2011/02/24/business/24fare.html?_r=1&ref=business

4 increases since the start of the year! This is almost sounding like the start of a hyperinflationary event where everything spirals out of control very quickly.

The bankrupt of england are still figting deflation with their ultra accommodative 0.5% base rate. The FED stooge on the bankrupt of england is still voting for more easing.

Meanwhile in the US the FED can't even see inflation in their figures.

You couldn't make this shit up.

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The thing is the oil is priced in to every single thing you buy. Not just the obvious stuff like air fares and petrol. Everything has transportation and manufacturing costs which use oil. Our rubber costs (for tyre production) will see their third increase this year in March. The latest by 10%. Which we will be forced to pass on to the customer.

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Here's your typical airline surcharge for cargo.

This is Cathay, cost per KG:

12/10/2006    £0.3708/02/2007    £0.3024/05/2007    £0.3720/07/2007    £0.4015/10/2007    £0.4314/11/2007    £0.4629/11/2007    £0.4921/03/2008    £0.5602/05/2008    £0.6509/05/2008    £0.7123/05/2008    £0.7616/06/2008    £0.8201/07/2008    £0.9122/08/2008    £0.8801/09/2008    £0.8508/09/2008    £0.7922/09/2008    £0.7520/10/2008    £0.6703/11/2008    £0.6117/11/2008    £0.5508/12/2008    £0.5108/01/2009    £0.4401/02/2009    £0.4101/04/2009    £0.3601/07/2009    £0.3901/11/2009    £0.4201/01/2010    £0.4526/04/2010    £0.4801/07/2010    £0.5101/11/2010    £0.5423/12/2010    £0.5721/01/2011    £0.6004/02/2011    £0.6301/03/2011    £0.67

It's been higher!

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The airlines can only hike fares so far before they hit demand destruction.

On my last overseas trip, to the US at the end of January, I was struck by how empty the planes were. There can't have been more than 70-80 people on an entire A330 crossing the Atlantic. It's not very often that you get an empty seat next to you in an exit row, but I did in both directions. When I've taken similar flights at the same time of year in the past, the planes have been 80-90% full.

The airlines are making a smaller loss selling seats at less than it costs to fly them than they are by not selling them at all. I can't see them having much scope to raise fares further in the near future, except on a few routes that have a high proportion of non-discretionary passengers (e.g. intra-Alaska flights on journeys that have no viable road alternative).

Edited by The Ayatollah Buggeri

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Agree with you, The Ayatollah Buggeri.

I was able to buy a fairly cheap seat from London-Glasgow last Friday evening. Booked 5 days in advance. Normally, this is a premium fare and it was also start of English half term hols. Got it for £60 all in from Easyjet.

Was surprised at low price and was planning to rent a car for the weekend to travel up and back.

Plane was full...so I'm assuming they sold low price seats right up until last moment?

Price of transatlantic travel is now very expensive for the average Joe. Your story of empty seats sounds like when I took Pan-Am to NY in 86. Had a "bed" (3 seats free for me) over and back. Both ways, plane was half-full , and that was in June.

Wonder if we're heading back to the days when air travel was seen almost as a luxury - something families did once a year....not every 2 weeks B)

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Here's your typical airline surcharge for cargo.

This is Cathay, cost per KG:

12/10/2006    £0.3708/02/2007    £0.3024/05/2007    £0.3720/07/2007    £0.4015/10/2007    £0.4314/11/2007    £0.4629/11/2007    £0.4921/03/2008    £0.5602/05/2008    £0.6509/05/2008    £0.7123/05/2008    £0.7616/06/2008    £0.8201/07/2008    £0.9122/08/2008    £0.8801/09/2008    £0.8508/09/2008    £0.7922/09/2008    £0.7520/10/2008    £0.6703/11/2008    £0.6117/11/2008    £0.5508/12/2008    £0.5108/01/2009    £0.4401/02/2009    £0.4101/04/2009    £0.3601/07/2009    £0.3901/11/2009    £0.4201/01/2010    £0.4526/04/2010    £0.4801/07/2010    £0.5101/11/2010    £0.5423/12/2010    £0.5721/01/2011    £0.6004/02/2011    £0.6301/03/2011    £0.67

It's been higher!

Cathay has just put their rate up to 83p from 14th March (for the far east). That is one big increase...

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  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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