Passengers Unlikely To Benefit From Decline In Airline Fuel Costs

Jan 22, 2015

The steep drop in oil prices is helping to pad the bottom line of Seattle-based Alaska Airlines. But don't expect lower fares on the horizon.

Fuel is an airline's biggest single expense, so the plunging price of jet fuel is providing a nice "tailwind," as Alaska Airlines Chairman Brad Tilden put it Thursday. This region's dominant air carrier boasted of record profits for the fourth quarter and for calendar year 2014.

Will lower fuel expenses lead to lower airfares? The answer is "no," according to Alaska Air's senior vice president Andrew Harrison.

"When pricing tickets we look at the supply and demand in each of our markets, and adjust prices to balance the two,” he said.

Harrison told Wall Street analysts during an earnings conference call that travel demand is strong and airplanes are flying nearly full. So there's little incentive to cut fares.

The benefits from lower fuel prices are instead landing in the pockets of investors and airline workers. Alaska Air Group's employees participate in a profit sharing plan.

In conjunction with its quarterly earnings release, the company announced that most of its 13,000 employees will receive bonuses next week equivalent to nearly a month's worth of pay.

Alaska Air Group is the parent company of Alaska Airlines and Horizon Air. The airline company also announced that it would boost its stock dividend by 60 percent, to 20 cents per share.

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