I wish they would just increase the freaking airfare.
UAL did just that today. They announced $35 O/W and$70 R/T fare increases in most of their markets. The only problem is that if US, AA, DL, CO, or NW don't match the increases, they will have to rescind them. It takes big nuts to be the first to jack up the rates, but if these increases stick across the board, then the industry as a whole may be able to recoup some of the ridiculous costs of jet fuel.
But, as we all know, the panic button will be pushed by at least one major carrier as soon as future bookings lose a few percentage points, and a fire (fare) sale will bring things back in line with $59 fares just to put butts in the seat. This will erode UA's efforts to bring pricing more in line with the cost of providing the service. The jury is out. Maybe this increase will stick.
Oil prices are way out of line with supply and demand right now. If prices were in line, oil would be about $60/bbl. What we're seeing is an artificial bubble caused by speculation in the NYMEX. Banks, Wall Street investment houses, and institutional investors have taken a huge beating with the write downs in real estate and subprime loans, and they are buying oil futures contracts to offset their losses. This is driving the bid/spot price for crude to ever higher levels. The loophole that Congress needs to act on and close quickly is the delivery of the product. Right now, if you purchase a contract for a barrel of oil on the futures market, you are not required to take delivery of the product when the contract comes due. Instead, you can close out the contract and apply the funds to another oil futures contract. I guarantee you that if the banks/investment houses/institutional investors were required by Congress to take physical delivery of the product, they would exit the market in droves for lack of storage. But, alas, no one in Congress has the balls to bring a bill forward because they are all on the take from the banks, investment houses, and institutional investors.
The other reason that oil prices are out of line is the weak USD. The Fed has lowered interest rates to save the banks and investment houses from their own stupidity, and each time the interest rate goes down, the value of the dollar goes down. Oil futures are priced in USD, and when the dollar falls, it takes more USD to buy a barrel of oil. In essence, our government is letting consumers take it on the chin to save the banking industry. Bad move in my opinion because the economy will collapse before the banks are able to cover all of their losses.
It all plays into this crazy economic situation that the airline finds itself in. One can only hope that US Airways is able to find a way to make up for the higher cost of fuel before Congress wakes up and does something about it.
