Over the last year, oil prices have dropped by more than 50 percent. Motorists filling up at their local gas stations know that prices at the pump have dropped precipitously.
But consumers who have logged on to Expedia or Priceline or Kayak recently to book tickets saw that airfares had not dropped along with oil prices, an airline's largest expense.
It's called capitalism. The cost of producing the product is not what sets the price. Prices are "what the market will bear".
If there is more demand, prices go up. If there is less demand, prices go down; except, if the price drops below the cost the seller goes bankrupt.
It's called price fixing....when the major US and European are allowed to merge/align, meet behind closed doors to keep supply (seats) down, and use their influence in DC to keep new players out of the transatlantic marketplace, that's not capitalism it's the old boys network.
Airlines go to the commodities market to "book" their oil prices a year or two ahead. Sometimes they win, sometimes they lose.
Because current oil prices are lower in the past doesn't mean the airlines are running all cheap jet fuel. They may be buying jet fuel based on past oil contract prices.
Airline industry profits do appear to be much higher than in years past, however. It appears they're investing those profits in new capital expenditures--new model airplanes that are more efficient on fuel. Hopefully there will be enough competition within this industry to keep airfares reasonably priced.
In the meantime, I'm flying on Norwegian Air Shuttle to Copenhagen for about 1/2 that of other international air carriers. Otherwise, I'd be traveling in North America this year.
They are also heading to Washington to do some high priced lobbying (with $ they got from the baggage fees) to get Emirates out of the US-to-Europe air transport business. If you can't compete, buy some congressmen and get them to pass a law.
