Oil prices, decontrol hoist cost of air travel
Americans are starting to pay more for air fares as jet fuel costs skyrocket and discounts dip, but there will be fewer restrictions on remaining discounts. This is the conclusion of airline industry experts and Civil Aeronautics Board (CAB) spokesmen as air carriers launch a new round of fare increases.Skip to next paragraph
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With gigantic gasoline price increases widely forecast for this spring -- some of which have already begun to surface at the pump in the last few days -- many more vacationers may forsake their autos for air travel, says the American Society of Travel Agents. And the airline industry, too, is projecting a resurgence in the wake of a lackluster 1980 season -- when many carriers lost money.
"Airfares are going to be a victim like everuthing else of soaring fuel costs ," says Daniel Henkin, vice-president of the Air Transport Association which represents 26 airlines.
His words are underscored by his association's formal petition to the CAB last week to raise ticket prices by as much as 3.8 percent. And on March 1, the CAB is expected to set a still higher maximum allowable ticket price ceiling. Air Transport Association spokesmen say jet fuel prices have been dealt the twin blow of OPEC's crude oil price increase in December and President Reagan's recent decontrol of domestic crude oil.
Paradoxically, huge increases in jet fuel prices come at a time when stocks of jet fuel are at near record levels. Production last week was nearly 2 million barrels a day more than the same time last year, according to US Energy Department figures.
Last week, jet fuel stocks in primary storage -- defined as at refiners and in pipelines -- stood at more than 33 million barrels, says DOE jet fuel expert Keith Bauen. "The oil companies have been holding back on jet fuel price increases because of the abundant supplies," he continued. Supplies were higher than ever up until three weeks ago."
But so hefty have recent jet fuel price increases been that some airlines have had to revise their 1981 fuel price forecasts -- sending reverberations to the ticket counters.
For example, Eastern Airlines says that because of OPEC price hikes and President Reagan's decontrol order, it will be paying $95 million in added fuel costs. The carrier attributes $45 million of this sum to the President's order.
"In January alone we have had 44 separate notices of price increases from 15 jet fuel suppliers," says Eastern spokesman James Ashlock. "One of the reasons fares were a little bit stable up to now was that in the last six months of 1980 fuel prices had stabilized. Now the increases are incredible."
As a direct result of these higher prices, Eastern will confine its New York to Los Angeles and New York to San Francisco flights to one round trip per route beginning Feb. 15.
"We're just going to have to back off on these routes because of these fuel increases," Mr. Ashlock says. "We're going to have to raise our air fares, too, " on this and other routes.
Major airlines are hoping this type of action will avoid another year of red ink in 1981. According to Air Transport Association spokesman, as a whole the major airlines suffered a record loss of approximately $200 million last year.
"We're hopeful that this year we'll see a turnaround," Mr. Henkin says. "We think as gasoline prices go up we may see more people switching to air travel."
Lynne Rutin of the American Society of Travel Agents agrees. "People are not as wedded to their family car as they used to be," she says. "Travel agents have been seeing an irreversible increase in their volumes, and we attribute this to the fact that people are turning to the airlines."
Even in 1980, when the recession put a damper on the increase in air travel, ticket sales by travel agents increased because of confusion over discou nts.