To what extent do fuel costs affect plane ticket prices?

Fuel costs typically account for around 25-30 per cent of an airline's total operating expenses.

In 2000, jet fuel cost around $US0.90 a gallon.

At the end of June 2018, that same gallon sold for an average world price of $US2.16.

One of the big problems for the airline industry is oil price volatility, and the price of oil determines the price of jet fuel.

Over the present century jet fuel costs have ranged from $US0.68 to $3.69 a gallon.

To inject some certainty into their costs, airlines frequently hedge fuel price changes so they can price fares without having to make adjustments as the crude oil price fluctuates.

However, it can still happen that when the oil price surges an airline will impose a fuel surcharge.

Unfortunately, that doesn't work the other way.

When the oil price tanks, airlines pocket the saving. 

Since mid-2017 the price of jet fuel has increased by about 50 per cent.

That's a substantial impact on airlines' balance sheets, so don't be surprised if airfares rise in the near future.

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