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Mitchell, Airlines & Gas Prices

June 25, 2009

The JS Online article notes that Southwest’s arrival at Mitchell International Airport should spark a price war between airlines, leading to lower air fares for passengers.  Tucked into the article is this foreboding quote:

“If you have the (cost structure) to walk the talk of low fares, you’ll be a winner in the end,” Mann said. If not, “You get into what amounts to a slow liquidation mode.”

One important component of a cost structure conducive to low fares is a low price for fuel. In fact, it recently overtook labor costs to become the largest expense for airlines.

Here’s a graph from the IATA showing the historical price of jet fuel and crude oil:

ChartB

I would suggest enjoying the low fares while they last.  Either fares will eventually rise or there won’t be as many airlines around, reducing the remaining airlines’ need to offer cheap flights.

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