In the past few weeks all we hear is that the airlines are going under and fuel costs are to blame. I don’t hear the media offering anything to explain the situation. They all just repeat the airline mantra, “fuel costs are causing the airlines to go under”.
Perhaps it is true. But I would like to see responsible journalism take an honest look at the math in simple terms that I can understand.
How does the cost of airplane fuel and auto fuel compare? Don’t planes fly on kerosene? How much fuel does it take to fly a given airplane from Chicago to New York? How much did they pay for the fuel in 2006?
Let’s assume the plane holds 150 passengers and all seats are sold. If it takes 3000 gallons of fuel to fly from Chicago to New York and the fuel cost $2.00 per gallon in 2006, the fuel cost was $6,000 or $40 per passenger. If in 2008 the cost of fuel is $4.50 per gallon, the fuel cost will be $13,500 or $90 per passenger. Thus if the airline increases the cost of a ticket by $50 ($90-$40), their revenue stream should be in about the same as it was in 2006.
Assuming other costs are relatively stable, it should be fairly easy to determine the price of the ticket for the airline to maintain the same level of revenue they had in 2006.
Show me that analysis. Perhaps the airlines are going under because of the cost of fuel. If it’s true, we may be willing to double or triple the price we pay for a ticket. But show me it’s so.