THE slumping oil price has cut the cost of petrol, making it a lot cheaper for Americans to drive. Yet although the price of jet fuel—which makes up around 30% of airlines’ costs—is down by more than half since January 2014, domestic air fares in America have barely budged (see chart).
Unsurprisingly, then, the country’s four biggest airlines—Southwest, Delta, American and United—are coining it. On January 19th Delta kicked off the results season for the airlines, announcing record fourth-quarter profits and forecasting that first-quarter margins in 2016 would be twice as high as in 2015. Analysts also expect its rivals to report bumper earnings for the most recent quarter. In July the US Department of Justice launched an investigation into allegations of collusion over pricing and capacity between the big four (which they deny). But arguments abound on why air fares are so high in America—and what regulators should do to cut them.
Some think the fact that America’s five biggest fund managers happen to be among the largest shareholders in each of the big four airlines discourages the carriers from competing...Continue reading
Source: Business and finance http://ift.tt/1nArpZB
EmoticonEmoticon