WASHINGTON — The cost of fuel is getting cheaper, but air fares aren’t —
and the D.C. area is no exception.
Numbers of factors are preventing airlines from lowering ticket prices.
One reason is they committed to paying more for fuel than it costs now. Crude
oil now is selling for less than $80 a
barrel.
“Until five months ago we had oil selling for well over $100 a barrel and the
airlines — as they should have — hedged their fuel prices. So they’re still
flying on expensive oil,” says Professor of Transportation Economics at the
University of Richmond George Hoffer.
Also, Hoffer blames elevated flight prices on lack of competition. The
industry is down now to three legacy airlines, Southwest and some marginal
players.
Hoffer says he has noticed that D.C.-area airports haven’t been growing as
much as they once did. He says mid-size airports are doing a better job of
competing because they are now more likely to share the same airlines.
There’s not as great a price incentive for people, say, from Richmond to head
up to Dulles, he says.
“Consolidation has resulted in this tacit — in essence — coordination of
people not increasing capacity. Of course increase in capacity would result in
more price moderation,” Hoffer says.
The Associated Press reports airlines that are declining to
lower ticket prices are passing on profits to investors, upgrading terminals
and computers and are on the biggest jet buying spree in aviation history.
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