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January 22, 2015

Airfares won't budge despite fuel savings

Despite a major decline in the cost of jet fuel, the price to fly remains sky-high

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012215_Airfair AP Photo/for PhillyVoice

Investors in Southwest Airlines have been big beneficiaries of the drop in jet fuel costs.

While plummeting gas prices have lately given U.S. drivers a boon of unexpected savings, the same cannot be said for frequent flyers. 

Airlines have opted not to respond to the falling price of oil with discounts in airfare, and the reason is pretty straightforward. According to CNN Money, a huge spike in demand for tickets has provided airlines a rare opportunity to recoup a chunk of their jet fuel costs in 2014.

Without any compelling incentive to slash prices, airlines have taken advantage of the chance to save on the resource that by far comprises their biggest expense. 

While the cost of jet fuel declined by 50% in 2014, demand for seats aboard commercial flights has remained strong. Airlines sold a record 83% of flight capacity last year, covering more than a record 800 million miles of travel. 

A spokeswoman for industry trade group Airlines for America pointed to a rise in other costs, such as wages, to help explain a 2.3% increase in airfare through November of last year. In part, she suggested, these savings will go toward improvements that directly benefit customers. 

"Lower jet fuel prices are benefiting customers every day as airlines invest in new products and planes, pay down debt, reward employees and investors," said Airlines for America spokeswoman Victoria Day

That final point about investors is certainly true: Southwest Airlines' 124% boost in shares made it the top performing stock on the S&P last year. American Airlines, United Continental, and Delta Airlines similarly all saw impressive gains in the past year. 

Read the full story here.