Airlines Raising Fares Over Higher Fuel Costs
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Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. Airlines are raising fares again. We'll explain why passengers can't avoid the fare increase by booking with frequent flyer miles coming up. First, these money headlines. The total net worth of U.S. households rose to over $100 trillion last the first time during the first three months of 2018 driven by rising property prices taking a look inside the numbers a bit the value of households real estate increased by about 489 billion dollars reflecting ongoing high home prices households also have about nine and a half trillion dollars in deposits which include checking and savings accounts and certificates of deposit.
But household wealth in the stock market fell by $436 billion in the quarter, reflecting declines in equity valuations amid stock market volatility. The Labor Department says the so-called gig economy is actually slightly smaller than it used to be. In May 2017, the Labor Department says it counted 5.9 million people, or 3.8 percent of workers, in what it calls contingent jobs, which are those that the workers don't expect to last or that workers call temporary. In 2005, the last time the Labor Department reported these numbers, The number of workers who put themselves in that category came in at a hair above 4%.
What headlines set the stage for airlines raising fares?
And a survey released Thursday by Merrill Edge says one in three Americans feel their financial stability is dependent on receiving an inheritance. About 36% of those in Generation X and 32% of millennials say they're relying on their family fortunes. About 20% of baby boomers say the same thing. For Generation Z, which is age 18 to 22, this number jumps to 63%, despite 87% describing their approach to financial decisions as do it myself. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. When it comes to airfares, what goes down often goes back up again. After moving steadily lower, airline ticket prices are taking off thanks to higher fuel costs. And Wall Street Journal Deputy Bureau Chief Doug Cameron joins us to discuss.
So, Doug, the price of oil is the usual culprit, and it's the culprit now. We saw a similar move in airfares about 10 years ago.
That's right. Fuel has now become the largest expense for airlines again. It was briefly overtaken by labor and staffing costs when oil was down at $30, $40 a barrel. Now we're double that, and fuel is very much the driving force of airline costs and ticket prices.
And the way that airlines tack on higher fares will be a bit different on domestic and international tickets, is that right?
That is. It's a little bit of rules and it's a little bit of business savvy. On international tickets, you've seen since the big spike in 2008 and 2009, airlines put on dedicated surcharges. They would say that, you know, it's going to cost 50 more dollars of fuel to get you from A to B. In the domestic arena, the Department of Transportation kind of frowned on that because oil was moving around and sometimes it was $40, sometimes it was $60, sometimes it was $20, and basically told airlines in the domestic market, don't do the surcharges. Just, you know, if you need to raise ticket prices or indeed lower them if oil changes, then just do it with the base fare.
And when these surcharges do appear on tickets, they can vary widely.
they can be all over the place uh it is in fairness to the airlines because oil moves around it's difficult on on any given day to say that again you know oil or fuel is going to cost 30 or 40 dollars more than it did last week or last year so what they did was bundle in a whole pile of things which they they sort of said was outside of the control fuel was the biggest component but uh You've seen over the past 10 years how security costs, be it at the airport or for airlines themselves, a big pressure. So they've kind of tacked on what they call out of our control costs. Insurance is another one, security and fuel costs. So you end up with big variations even in similar markets.
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