Super-low gas prices are making drives a lot cheaper and saving airlines millions of dollars in fuel. But if you're expecting that windfall to drop the cost of a plane ticket, don't hold your breath.
Airlines spend more on jet fuel than anything, and its price has been cut nearly in half over the last year, industry data show. But the typical domestic plane ticket over the past year actually got $10 pricier; all those added baggage, early-boarding and other fees climbed even more.
Airlines are simply not rushing to pass their savings on to travelers. As Delta chief executive Richard H. Anderson said on a call with analysts Tuesday, "These jet fuel savings are enormous, and we are diligent at maintaining those savings for the bottom line."
Delta said it will save more than $2 billion on fuel this year, though Anderson added the savings would go straight to paying down debt and funneling more cash to company shareholders -- not to lowering prices.
Part of that reluctance, airlines say, is out of their control. Airlines work off long-term contracts for kerosene, so they're still paying the older, higher price for fuel. Economists at the industry's trade group, the International Air Transport Association, said carriers won't start really enjoying cheap fuel until this summer, which could potentially lead the average plane ticket price to fall about 5 percent -- without factoring for taxes or fees.
But the less-surprising answer for why airlines won't slash their prices: They don't need to. A flurry of airline mergers has consolidated the competition, while demand for plane tickets remains sky-high. In fact, airlines predict cheaper gas at the pump will convince even more travelers to fly, boosting revenue.
U.S. airlines are already flying at record capacity, meaning planes are fuller than ever, and they're not exactly hurting for cash. The top airlines posted more than $3 billion in profit between July and September, their sixth profitable quarter in a row, federal data show.
"In a strong demand environment," American Airlines Group president Scott Kirby said on a conference call in October, "we don’t plan to go off and just proactively cut fares."
Sen. Charles Schumer (D-N.Y.), a perennial critic of flight fees, said in a statement last month that federal officials should investigate why ticket prices are "defying economic gravity."
But an industry group, Airlines for America, shot back, calling air travel "one of the best consumer bargains" and saying cheaper fuel has let airlines pay down debt and buy new jets, among other investments.
"Airlines should be treated like every other business," the group said in a statement. "When the price of coffee beans falls, no one asks Starbucks why his or her latte does not cost less.”
That's not to say the travel industry isn't ecstatic over cheaper fuel. Travel site Orbitz, now looking for a buyer, is expecting a swell in U.S. travel to boost its revenue to a record $932 million this year, according to Bloomberg.
Short answer: A lot of people will save a lot of money off cheaper jet fuel. It just won't necessarily be you.