Air Travel And Airlines

Reasons why Airfare Costs keep Rising

John Atchison's image for:
"Reasons why Airfare Costs keep Rising"
Image by: 

Traveling has become a very expensive proposition for millions of Americans these days.  One need only look at the 2010 holiday season to realize that prices for things such as airfare are through the roof and don't show signs of stopping anytime soon.  With the economy struggling to get back on its feet, many would think airlines would be lowering rates to attract customers, but that has not been the case.  So why then do these airfare costs continue to rise?

The first reason should be crystal clear to everyone: fuel costs.  It might be hard for some to believe, but going back as few as say ten years ago, fuel (oil) was running at a cost of twenty dollars a barrel.  Now fast forward to present day and you can see why airlines have struggled to keep prices down.  Before the Middle East issues of the past few months, oil was running around 80 dollars a barrel.  Now with the Libyan and Egypt situations, that price is now into triple figures.  Airlines to stay afloat have to pass on the expense and of course, that ends up hitting the wallet of the consumer.

There are other reasons though that affects costs for flying as well.  How about the Economics 101 law of Supply and Demand?  It definitely comes into place where airlines and airfares are concerned.  To start with, there has certainly been a thinning of the corporate herd if you will.  Go back those same ten years talked about earlier and you would see that quite a few more airlines were in business, giving consumers more choices and plenty of seats to choose from.

Times though have changed and fewer airlines are out there now.  That has led to fewer planes going to destinations.  At the same time, demand for the service has not changed, leading to jam packed planes, few available flights, and higher costs for the consumer.  One would think that the airlines would open up more flights to help quell the overwhelming demand, but instead they stay status quo, not wanting to get burned again by opening up more flights, then demand drop off and the airline be left hanging.

Finally, the bargain, low cost airlines are disappearing from the landscape of the airline industry.  They are either being bought up by the bigger airlines, merging together to form bigger groups, or simply trying to expand their base, thus taking them out of that bargain airline role.  Growing larger means more overhead costs for these once bargain airlines, meaning their costs are past on to the consumer.  Same with the airlines that are buying up routes or trying to setup their own hubs.  Between the costs of that and the much bigger airports they have to deal with, the combination of delays and operating costs quickly drive them out of the bargain business.

These three reasons are more than enough to keep the price of air flight for the consumer to continue to elevate to new price hikes.  Perhaps if the Middle East becomes more stable, the price of oil will come down some and that will regulate.  But until the airlines get back to putting out more flights for consumers to take, the outrageous prices will be sticking around for the foreseeable future.

More about this author: John Atchison

From Around the Web