Jet Fuel Pricing In Airline Industry

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TABLE OF CONTENTS: 1) Introduction 2) Jet Fuel Price 2.1 Supply and demand 2.2 World economy decision by OPEC 3) Jet fuel price impacts on 3.1 Airline profitability 3.2Airline Fares 3.3 Airline fuel hedging 4) Fuel Price Monitor 4.1 Year Wise Fuel Price Fluctuations 4.2 Price Analysis 4.3 Platt’s Methodology Of Fuel Pricing 5) Conclusion 03 INTRODUCTION: In the fast paced world Aviation is one of the best transportation service. Fuel is one the major costs regarding to the pricing in aviation field. Fall in price of jet fuel is the great advantage to the airlines in the aviation industry. Fuel price is one of the important cost factors, which impact the airline industry, but it doesn’t impact the airline ticket…show more content…
Airline industry is one of the fastest modes of transportation for the passengers and also cargo (goods carried) services. Jet fuel price is the price charged for the amount of jet fuel, which is used to operate an airline. Among various cost factors jet fuel is one of the main operating cost factor with 40% of its overall operating costs, which are again responsible for finalizing the airline ticket prices and fares. Prices of jet fuel fluctuate from day to day. 2.1 Supply and demand When the supply and demand are at equilibrium levels, the prices are constant and the airline makes profits. As the matter of fact fuel is one of the important factor with 40% of its operating cost levels it impacts the price levels in a beneficial manner. With the low operating costs and same price levels (before the reduction of fuel price and after the reduction of price) airlines incur profits, then the airline estimates the profits levels and it may provide cheaper fares or lower the fares that will increase the demand at the same supply level. In the above graph when supply and demand meet at a point called equilibrium point with minimum price levels, and low operating cost (fall of price levels) airlines make…show more content…
Many factors constitute in fixing prices. The following are the factors which affect airline pricing they are a) Cost of fuel: There are many expenditures airline bares to conduct a single operation and to operate multiple operations at a time airline undergoes many expenditures, among them the following are the costs they are operating costs, labor costs, maintenance costs, landing costs and jet fuel costs.Jet fuel is one the major operating cost factor that affect the airline fares. With the decrease in cost of jet fuel airlines makes many profits. And with the increase in cost of fuel airline reduces the profit levels. Few airlines may also incur losses due to the increase in the price of jet fuel. Cost of jet fuel is directly proportional or directly impacts the airline profits and airline fares. Jet fuel prices will impact any airline, whether is a profiteer or a low competitive airline. b) Other factors: There are many other factors, which impact the airline fares other than the fuel they are of following i. Supply and demand: Demand is calculated based on the passenger willingness to pay and travel according to their wishes and their own

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