Gas Is Down, But Most Airfares Stay High

An airline worker removes a fuel line from a Southwest Airlines plane. i i

In October, Southwest Airlines, one of the only carriers to resist fuel surcharges, reported a loss for the first time in 17 years. Justin Sullivan/Getty Images hide caption

itoggle caption Justin Sullivan/Getty Images
An airline worker removes a fuel line from a Southwest Airlines plane.

In October, Southwest Airlines, one of the only carriers to resist fuel surcharges, reported a loss for the first time in 17 years.

Justin Sullivan/Getty Images

Gas prices are the lowest they've been since February 2007. According to the Department of Energy, prices have fallen more than $1.50 a gallon since the middle of September.

The costs of jet fuel and diesel have also declined. But many of the fuel surcharges that airlines passed on to customers to offset high prices have stuck around.

The U.S. airline industry estimates its expenses jump by $430 million every time the price of a barrel of crude oil increases by one dollar. So, this summer when fuel prices were through the roof, a surcharge seemed like a reasonable thing.

But then fuel prices dropped — and many airlines were still using the surcharges. Rick Seaney, CEO of the Web site Farecompare, described it as a PR headache.

"The fuel surcharges had little to do with the price of fuel or the length of a trip," Seaney said, "but it had everything to do with higher ticket prices."

Seaney says that in the last week or so, airlines have eliminated surcharges on thousands of domestic flights — but it hasn't become any cheaper to fly. Those extra charges are now just part of the base ticket price.

"While it was good news that there's a little more transparency, the bad news is it really didn't help people on the consumer side, from a ticket price standpoint," Seaney said.

And, he says, there are still hefty surcharges on international flights. The average is $300 to Europe and $360 to Asia.

It's normal for airline customers to expect fares to fall along with gas prices, says David Castelveter, vice president of the trade group Air Transport Association. But, he says, it's not a simple process.

"The price of fuel has been high for a long time," Castelveter said. "Because it only recently dropped, you can't just draw a line across and say, 'Geez, we are where we were when we started' — because we're not. We have a lot of catching up to do."

Castelveter says the airline industry will lose between $3 billion and 5 billion this year — proof that it never raised prices enough to cover the increased cost of fuel. Even the surcharges weren't enough to bring airlines back to profitability.

And airlines certainly aren't the only businesses hanging on to higher prices. Taxis in many cities have added surcharges this year, as have delivery services such as UPS. And it may be months before those added costs are removed.

When it comes to fuel surcharges, it seems it could be a while before consumers experience the same relief they've felt at the pumps.

Correction Nov. 13, 2008

We said, "UPS, and all shipping companies, have had fuel surcharges for years, and those charges jumped over the summer." The U.S. Postal Service has not imposed any sort of fuel surcharge.

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