With fuel prices increasing, travelers can expect to see a hike in airfare prices in the coming months.
Delta Air Lines, the second largest U.S. airline, reported record revenue in its first quarter earnings, but warned its costs continue to climb.
Experts say the Delta earnings are a sign commercial airline ticket prices are likely to rise soon, as airlines continue to compete with each other to offer customers the best deals.
Delta said its first-quarter fuel prices were 20 percent higher than during the year-ago period, but company leaders hope high customer demand will help weigh out costs.
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“We have confidence in our plan to grow earnings in 2018 through top-line growth, improving our cost trajectory, and leveraging our international partnerships,” said Ed Bastian, Delta’s chief executive officer.
Jay Ratliff, local aviation expert, said jet fuel prices are approaching at a three-year high right now. He said the impact on airline prices will be more clear as airlines post quarterly results.
“Fuel prices are going up,” he said. “Airlines are wanting to pass those costs to the consumer. The problem is, consumers are not that loyal. If another carrier has a cheaper price, they’re going to go with it.”
Ratliff said airlines previously hedged, or negotiated a deal with fuel suppliers locking in a set price for a certain period of time. If the fuel prices went up, the airlines benefited from fuel hedging. If the price of fuel decreased, the airlines were paying more than they needed to.
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“Most airlines used those fuel hedging contracts … because it made it easier for them to estimate and plan their business,” he said. “The problem is over the last several years as fuel prices kept dropping and dropping and dropping historically, most airlines got away from fuel hedging. They just paid whatever the going rate was.”
If fuel prices continue to rise, airlines will be forced to take a hit financially or raise ticket prices — risking the loss of customers to cheaper fare.
“You don’t want to be the first airline to raise prices because of fuel,” Ratliff said. “If other carriers don’t follow your lead, there’s a chance you’re going to lose some of those bookings to your rivals. We haven’t seen much in fare increases over the last year yet. They’d love to do it but they can’t.”
Locally, Delta serves has increased its presence at the Cincinnati/Northern Kentucky International Airport and the John Glenn Columbus International Airport while its passenger traffic lags in Dayton. The airline halted its Dayton-New York LaGuardia nonstop route. In 2017, Delta served approximately 20,257 passengers at the Dayton airport — a decrease from the 22,915 enplanements in 2016.
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Delta’s passenger traffic in Dayton decreased 7 percent in February compared to the same time in 2017. The airline served 19,031 passengers in February, according to airport data.
Dayton aviation director Terry Slaybaugh said the airport is still “looking at a pretty flat year” in passenger traffic. The airport is honing in on a strategic plan for 2018 that focuses on business travel and improvements to help keep it competitive with airports in cities like Columbus and Cincinnati and keep one of the city’s top economic engines vibrant.
The airport plan includes major efforts planned to keep passenger traffic steady, increase seat capacity, sell and develop more commercial real estate owned by the airport, and make headway on expansive terminal renovations, Slaybaugh told this news organization. Terminal renovations are underway right now.
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