Airlines unlikely to drop fuel surcharges

Oct. 21, 2008 at 4:01 PM   |   Comments

NEWARK, N.J., Oct. 21 (UPI) -- U.S. airlines are unlikely to lower ticket prices even though the price of jet fuel has dropped significantly since summer, industry observers say.

The airlines slapped a fuel surcharge onto tickets when the price of oil was hovering near $150 per barrel -- now it is half that amount. But because the airlines still face financial peril, they are motivated to keep ticket prices stable, The (Newark) New Jersey Star-Ledger reported Tuesday.

"They've been losing a ton of money," Ilker Baybars, professor of operations management at the Tepper School of Business at Carnegie Mellon University, told the newspaper, adding that airlines have cut fleet capacities by 7 percent to 10 percent, reducing the number of available seats and propping up ticket prices.

"Airlines are also experiencing a reduction in demand due to upheaval in the financial markets," Continental Airlines spokesman Dave Messing said.

However critics, such as U.S. Sen. Bob Menendez, D-N.J., say airlines should eliminate the fuel surcharges for holiday travel.

"You can't continue to have high prices when fuel is half of what it was before," Menendez told reporters Monday at Newark Liberty International Airport.

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