Think air fares are high? According to one airline-industry expert, they're not high enough.
In a teleconference with journalists Thursday, Darin Lee, an economist with LECG LLC, said that while air fares have increased, they haven't kept up with the increasing price of jet fuel, which is now about $3.95 a gallon. In 2000, the average price for a gallon of jet fuel was $1.10. LECG is a firm based in Cambridge, Mass., that provides independent testimony, analysis and research for corporations, law firms and government agencies.
"Fares probably need to increase at this point another 15-20 percent before airlines cover their costs," Lee said.
Fuel now accounts for nearly 30 percent of passenger carrier costs, more than twice that of 2000. Lee's personal Web site,.darinlee.net, features a fuel-cost calculator for airline tickets. Users are asked to input a ticket price between two cities to find out how much fuel their plane will burn.
For instance, if a passenger flies nonstop from Salt Lake City to Baltimore on a Delta Air Lines' Boeing 757, the ticket on Sept. 8 would cost $348 before taxes. With jet fuel at $3.95 a gallon, 69.6 percent of the ticket price would go toward the cost of fuel, according to Lee's calculator.
Some planes are more fuel-efficient than others, and airlines are dropping almost 35 percent of domestic routes with large planes that seat more than 161 people, such as the Boeing 757, Lee said. But airline companies must also consider economics of scale, and whether it's cost-efficient to fly a small number of people between two cities.
Almost 19 percent of regional jet routes that fly fewer than 50 people are also being cut. The best "operating economics" are large regional jets that transport 50-86 passengers, and airlines are increasing those routes by 8 percent, he said. Aircraft routes that seat 87-160 passengers have decreased by 3 percent.
Overall, there will be 10 percent fewer domestic flights between November 2007 and November 2008. Delta, which has a hub at Salt Lake City International Airport, is cutting 12 percent of its domestic routes.Many of Delta's flight reductions are from non-hub airports, Lee said. "Those flights turned out to not be economical."