Why is U.S. senator Chuck Schumer so concerned about airfares?
At a Sunday press conference, Schumer "called for a federal investigation into the high price of plane tickets," according to the New York Daily News. Schumer argues airfare should be dropping along with the press of fuel.
"The No. 1 cost for an airline is fuel, and fuel prices are way down,” Schumer said. “Why are ticket prices still going up? Why isn’t the consumer getting some benefit here?”
If you're a regular reader of this blog, you probably understand the problem. Airline fares are generally a function of supply-and-demand. If more people want to travel, fares rise. If fewer people want to fly, fares fall. Right now, people want to travel, and there's limited supply.
I realize this isn't great news for the public. And it's probably good politics to whine about high airfares. But you can't expect airlines, most of which are publicly traded companies with shareholders, to lower fares just because fuel costs drop.
Schumer may, however, have a point about one issue. Several years ago, in response to high fuel costs, airlines started adding "fuel surcharges" to many tickets. These charges are tacked on above regular fares and in some cases add several hundred dollars to the cost of a ticket.
But even as the cost of fuel has dropped, airlines have continued levying these fuel surcharges. So far, only Japan Airlines has dropped its fuel surcharge. It probably is misleading to continue charging these surcharges when fuel is so cheap. If airlines want to raise ticket prices, that should be OK. But they shouldn't pretend the extra money is going to pay for fuel.
What do you think? Would you like to see airlines get rid of fuel surcharges? And do you think the government should investigate the overall pricing practices of airlines?