Blog | Can Fare Increases & Capacity Decreases Continue to Offset Rising Fuel Prices? Investors Say No.

22

Feb
2012
Comments Off

Can Fare Increases & Capacity Decreases Continue to Offset Rising Fuel Prices? Investors Say No.

 

Airlines stocks fell on Tuesday as fuel prices rose, suggesting that investors may be nervous that recent fare increases may not be enough.  Shares of some of the big airlines fell 10 percent or more, although they recovered slightly on Tuesday afternoon.

 

Jet fuel is the single biggest expense for most airlines. As of last week it had risen 12 percent over the past year, according to the U.S. Energy Information Administration. Oil prices rose further on Tuesday, up $2.65 to $106.25 per barrel in New York. That’s its highest price since May 4.

Chart: US Jet Fuel Price by Month (USD)

Over the past couple of years, airlines have been quick to raise fares to pay for that more expensive fuel, even if those higher fares force some potential travelers to stay home. Most of the big airlines are flying the same amount this year, or shrinking slightly. American Airlines is pruning more aggressively as it reorganizes under bankruptcy protection.“The stocks are just going to move with oil, it’s as simple as that,” said Helane Becker, an airline analyst with Dahlman Rose & Co. “No matter what the airlines do to tell people it’s changed and they manage their business differently. They’ve proven the model, right? They’ve proven that they’ll take capacity out, and they’ll raise ticket prices, and they made money last year. It doesn’t matter. The stock’s still soft.”Source and Complete Article: http://www.washingtonpost.com/lifestyle/travel/higher-oil-prices-push-down-airline-shares-ual-down-9-pct-delta-down-7-pct/2012/02/21/gIQA7umwRR_story.html


Comments are closed.