Wednesday, March 9, 2011

Airlines Cutting Flights and Raising Fees




Right now the airline industry is in a hard spot. Airlines from all over the world are doing whatever they can, not only to make more money, but to cut their costs. As airlines get hit with higher fuel prices, travelers are getting slapped with higher fees.
These new higher fuel prices actually stand to threaten the recovery of the airline industry as a whole. Although the airline industry was showing signs of improvement, it appears that some experts think that things could come crumbling back down.
Just last month, Air New Zealand, as well as Qantas, increased fares on some of their routes. The biggest problem here is that these two airlines had already increased their fares last year by 9 percent. Some experts are scared that some consumers could get priced out of traveling by air.
As said earlier, the biggest problem affecting airlines is jet fuel prices. These fuel prices have been rising due to the fact that the price of crude oil is also on the rise. During the past three months, crude oil prices have gone up as much as 40 percent. As trouble in the Middle East continues, people expect gas prices to continue to rise.
An aviation analyst at Goldman Sachs, Marcus Curley, said that Air New Zealand was largely hedged for the next six months against crude prices. However, they were not hedged so well against jet fuel prices. The recent increase in crude is not as important. It’s actually the refining margins that are so significant. Something will have to be done quickly or airlines are going to have to continue to increase fares and fees.


By
Neha Jain



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