Airlines rejoicing over lower fuel costs

November 3, 2014 |

Fuel costs have continued to drop to the lowest numbers in recent history, causing airlines to haul in major profits at the expense of customers having to endure ticket fares remaining the same. Jet fuel is essentially the biggest expense for airlines, and since around mid-June, extreme drops in crude-oil prices have caused jet fuel prices to decrease by around 20 percent, according to the Denver Post.

Current prices of jet fuel
All four of the main airlines in the U.S. have reported record low costs for jet fuel, with American Airlines reporting the lowest prices at $2.97 per gallon, Southwest Airlines at $2.99, United Airlines at $3.02 and JetBlue at $3.05. When compared to last year, the average costs of jet fuel were slightly higher, being reported between $3.03 and $3.14 per gallon during the third quarter of 2013.

Obviously, the lower fuel costs are resulting in higher profits for the airlines, but while prices in jet fuel continue to dive, ticket fares are staying steady. The decrease fuel costs have vastly benefited Southwest Airlines the most, who have reported earnings of $382 million this year, an increase of $141 million when compared to last year, according to Fortune. Other airline titans such as United and American have tallied their best quarter numbers ever, boasting record numbers of $1.1 billion and $1.2 billion respectively.

Attendance is still booming
With the upcoming holiday season steadily approaching, the profits are projected to only get bigger for these airlines. Improvements in flight attendance have continued to significantly increase from last year, with the top four airlines in the U.S. selling at least 83 percent of their seats in the third quarter of 2014, whereas a decade ago, less than 75 percent of seats were sold at this time.

What’s surprising seems to be the fact that despite the recent Ebola scares, there has not been any drop in airline attendance reported so far. In fact, all of the major airlines in the U.S. beat the financial projections and expectations that were predicted by Wall Street experts for the third quarter.

Why is crude oil so cheap?
The overall price in crude oil has dropped 29 percent in the past 3.5 months, according to Bloomberg. There have been a number of factors that play into why these costs have been so low, including a recent boost in U.S. production, increasing crude oil demands from China and Europe as well as violence in the Middle East never truly impacting a disruption of distribution.

Another primary reason for the record low prices includes Saudi Arabia’s decision to begin reducing crude oil prices for its largest customers. The country is the world’s largest exporter of crude oil, and has surprised many economic experts with its decision to reward its loyal customers with lower costs rather than spike it up during these times of high demand. As of Oct. 16, the Brent crude pricing for a barrel of crude oil has dipped down to $82.60, the lowest its reached in the past four years. A little more than three months ago, the cost per barrel in the U.S. was held at $115.71, which has only helped boost the overall profits for the major U.S. airlines.

Time is now
While companies all over the world are finding this news as ecstatic, experts are cautioning that these extremely low prices probably won’t last for more than a few months. This means that the time is now for travelers looking to finally go through with their vacation getaway plans, and there’s no better time to take advantage of these prices during the holiday season. Once fuel costs start to rise back up, it’s evident that travelers could endure a spike in flight costs and expenses.