News / Economy

As Oil Prices Surge, So Do Airfares

As Oil Prices Surge, So Do Airfares
As Oil Prices Surge, So Do Airfares

As the price of oil has surged because of the unrest in the Middle East, so have airline fares.

Airlines around the world are quickly boosting their fares to keep pace with higher jet fuel costs, which account for 30 percent of the carriers' operation expenses. The price of oil has risen sharply as the turmoil in oil-producing states like Libya has traders worried that the world's daily flow of oil will be diminished.

Some U.S. air carriers have already raised fares six times this year, topping the four price hikes for all of last year. Now, U.S. business travelers are paying about $100 more per round trip than a year ago, while fares for leisure travelers are up by $40 to $60. U.S. airlines have also boosted fuel surcharges on overseas flights to Paris, Frankfurt and other European destinations from $360 to $400.

Chinese airlines have also increased their fuel surcharges for passengers, as have airlines in the Ukraine, Britain and Canada.

Even as air carriers increase their fares, the airline industry says its profits will erode this year. The industry's main trade group (the International Air Transport Association) says airlines overall had net profits of $16 billion in 2010. But now the industry is predicting that with the higher fuel costs the figure will fall 46 percent this year to $8.6 billion.

Some airlines have been able to limit airfare increases because they bought jet fuel at cheaper prices, before the recent jump in oil prices that now have reached $115 a barrel for crude oil on the London market and more than $104 in New York.

But the industry says that for each dollar more for a barrel of oil it has to pay, the airlines' costs increase by $1.6 billion.

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