Do Rising Oil Prices and Airline Ticket Prices correlate all that much?

The price of oil in this day and age has been historically high in the past decade. It has an obvious effect to consumers who pump their gas, but the real question is if it has any affect on airline ticket prices?

The short answer is yes, but it is not as simple as that. The cost of oil is certainly a factor in deciding airline ticket prices, but there are are many other factors that are considered as well.

Demand is ultimately the biggest factor in determining the price for an airline ticket. Airfares have risen by over 20% this year, and international airfares have risen over 12%.

The recovery in the aviation industry is in full swing, and the airline tickets show. Eduardo Mariz, a global aviation analyst, provided some insight on the recovery.

“Demand has recovered so they can raise fares without losing customers… U.S. carriers tend to be unhedged, but the recovery has been stronger than for others, so we will probably see them raising fares faster.”

He also added that, “in other markets, where airlines still want to promote demand, they may be reluctant to raise prices right away” for fear of blunting the slower recovery in travel there.

Currently, airlines are trying to hedge against any other uptick in oil prices and are buying more in supply to get ahead of the game. Delta, United, American, Rynair, and Lufthansa are just a few names that are making this move right now.

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