Lower fuel prices lowering airfare

By Michael B. Baker, Business Travel News Editor

Atlanta – Lower fuel prices have moderated airfares and could lower them further should fuel prices stay low, Delta Air Lines president Ed Bastian said on Monday at the Association of Corporate Travel Executives Global Corporate Travel Conference here.

“If we’re going to see fuel staying at the $50 to $70 trading range, you’ll see prices fall,” Bastian said in an acknowledgment of analysts’ recent assertions. “With lower fuel costs, it’s natural you’re going to find more capacity coming into the marketplace because it’s efficient to fly, and it’s going to put a ceiling on pricing.”

Though airline fuel-hedging strategies have delayed the impact of fuel prices on fares—Delta so far has enjoyed “about 50 percent of the benefit” on its bottom line from lower fuel costs, Bastian said—Delta’s year-over-year unit revenues are flat to down across the board, he said, indicating that fares have modulated. Should fuel prices remain low, that would continue throughout the summer, he said.

Delta executives late last year said they hoped fuel prices would have only a minimal impact on pricing. Bastian on Monday reiterated that Delta still plans to control capacity growth despite fuel cost savings and that he hopes other airlines would do the same.

“Before we start taking $50 to $60 oil as the new norm, we want to make certain it’s going to stay there,” he said. “The last thing we want to do is use that price to plan the future. You’ve all seen that movie before, and it didn’t have a happy ending.”

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