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Expert: Low Fuel Prices Don't Lead To Decreased Airfares

Brian Herzog

Gasoline prices are once again plummeting across the nation, and in the Hoosier State, the average price of a gallon of unleaded gasoline is sitting at $1.79.  

Jet fuel prices have been dropping as well. However, airline fares haven’t seen as drastic of a price drop.

About 30 percent of airlines’ operating costs are fuel. With the large dip in fuel prices, you might expect to see a dip in ticket prices, but that is not where the money has gone.

Robert W. Mann Jr. is the president of airline consulting firm R.W. Mann Inc., and he says airlines have pocketed most of the savings.

"The benefits of lower fuel prices are really going to the carriers, who then decide how to distribute it," he says.  "We've seen buy backs, we've seen dividend increases, we've seen increased compensation."

Mann says about two-thirds of the added profits gained by low fuel prices are being kept in house, and some of that money is going to re-investment. The other third has gone toward reducing fares, he says.

According to the Bureau of Transportation statistics, adjusted for inflation, the average fare for a round trip ticket from Indianapolis was more than $400 dollars during the first quarter of 2015.

Even though fuel prices are low, Mann says airlines are looking into buying used aircraft with less efficiency, and hoping to save even more money on operating costs.

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