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- How Increasing Gas Prices Will Affect the Airline Industry
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## How Increasing Gas Prices Will Affect the Airline Industry

Since 1995, air fares have shown a steady decline in price. “What?” you ask, “I thought they were up!” Of course, this may seem right if you look at your current ticket stub with one hand while looking at a ticket stub from a few years ago. However, not everything is as it seems. There are a couple of points to consider to be fair:

- When comparing airline ticket prices with past years, inflation must be taken into account so that prices can be related using the same index. In other words, put past years’ prices into today’s dollars so that a real assessment can be made.
- A trend, in this case, is a statistical method that shows the general direction of data over time (for math geeks, it’s called “linear regression”). It’s mathematically robust – the numbers don’t lie.

When you combine #1 and #2 above, you get an indisputable trend showing that airline fares have been gradually declining over the past 17 years. In 2011 dollars, these ticket prices are more than $50 cheaper than in years past.

That said, while the general trend shows a decline in prices, the last three years are showing a reversal of that trend, which also coincides with the recent trend of rising gas prices. In addition, the average price of baggage fees has also increased in recent years, perhaps as a way to offset the cost of fuel for airlines.

Unfortunately, airlines can’t do much about gas prices: if they go up, they have to eat that cost or pass it on to the consumer. In the past, most of them have tried to pass the cost on to passengers; this works when low-cost carriers also raise airfares, but sometimes it will fail if not all airlines are “on board”.

In addition, the number of airlines has decreased in the same time period, which gives them more power to control the cost of the flight. Compared to 22 airlines in 2007, there are only 17 as of March 2012. Fewer choices, higher fuel costs, fewer routes means airfares are likely to continue to rise.

Will ticket prices reach the levels found when the downtrend began? This is hard to say as this recent trend is only 3 years old. If nothing changes in the contributing factors, it won’t be long before flying becomes quite expensive. However, there is a price range that airlines have to stick to in order to attract enough customers, so we’re probably pretty safe in the short term.

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