Fuel Prices Likely To Raise Airline Ticket Prices

[jeffrey]

Rising fuel prices won't only hit you in the pocket when driving your car, but also when you fly. Airlines have already started to raise prices and the recent $20 fare increases by large airlines won't cover the cost of more expensive jet fuel.

In addition to an increase in ticket prices, passengers will also likely see more and more flight cancellations. Airlines will be forced cancel flights that have weak bookings to trim costs. Without ticket increases and trimming flight schedules, many airlines will face bankruptcy if fuel costs continue to rise.

The problem is that most big airlines are defenseless against jet fuel increases. Due to the current climate with most airlines already struggling, airlines don't have either the cash or the financial credibility to hedge or lock in a future jet fuel prices.

The only major airline that fuel price rises will have a limited effect upon is Southwest which has 85% of its fuel hedged at $26 a barrel for the rest of this year. Other major airlines are in much more precarious situations with no fuel hedged this year (Delta Airlines and US Airways) or limited fuel hedged (American Airlines 15% and United Airlines 30% of their fuel this quarter).

[PRICEPLUS]

Interestingly enough I heard a couple of months ago that airlines were also burning more fuel because Americans weigh more. Pretty interesting story.