Why are important variations of oil in the aviation industry?

Why are important variations of oil in the aviation industry?

The price of fuel has a fundamental role in the global economy because it directly impacts the price regulation of various industries. One of the most representative industry, which is directly affected by changes in oil prices is the aviation industry, because fuel represents 40 percent of the costs fixed for its operation, this cost is borne by the companies areas in most cases are private in nature, but this is an industry that is characterized by a high level of regulation by the state, largely because it represents a source of income for countries because of tax rates. For example, in 2012, the Department of Transportation of the United States ruled that “when a cost component is described as a fuel surcharge. The amount must be reflected in reality a reasonable estimate of the cost of fuel per passenger incurred by the company “.

Therefore, generally the most affected are the final customers, which can be air passengers who buy tickets at a very high price, or users of air freight shipments. This plight directly affects the growth in demand for air transport related to this market, other industries are also affected by this phenomenon, such as those that depend directly on tourism and hotel occupancy. It is for this reason that regulators in countries implement policies to prevent the bankruptcy of Airlines companies.

As a measure to reduce the risk that changes bring oil companies have taken different internal strategies, for example, companies in this sector have made investments aimed at modernizing its fleet, which contains the technologies that allow you reduce fuel use, other measure taken by the airlines is that they are generating more promotions to attract customers, which increases the volume of passenger traffic, increased revenues and the impact of fuel is minimized. Also, some time ago, when this commodities began to have very drastic fluctuations, some airlines began to take action in more logistical aspects of each flight, for example they began to count the weight of the food, buying new cars for hostesses and reduce use of wraps and getting to the point of making tourist packages that do not include meals on the plane. These and other mechanisms are used by companies to reduce part of its fixed costs and thus manage to be competitive in this market where few companies achieve success. Some companies are investigating and exploring other sources of energy to replace fuel, however it is not easy because this fuel has characteristic components that make it difficult to replace.

There are also other factors that intervene in the price movement of this hydrocarbon, must take into account the geopolitical context, directly it affects the supply of this material, for example “The crisis generated in Egypt, Libya, Yemen and Tunisia (3 percent of world supply) made the price of a barrel of oil climbed 15 percent. ” In response to this effect was created and unilaterally decided by the big distributors in the 1960 OPEC (Organization of Petroleum Exporting Countries), which is responsible for coordinating the policies of oil production from its member countries, in order to stabilize the international oil market.

At present, the oil has reached the lowest point in 12 years, down from US $ 30 per barrel, which should be reflected in the direct and indirect costs of air operation, then the users of this service several questions are asked, as: How you could benefit from these changes? How can the airlines charge passengers a fuel surcharge?.The reality is that prices are not declining fares as airlines are charging over-rates in the final price of the tickets, this is largely because they charge for other items in order to maintain profit margins that are used to have. The question is how government protect the consumer rights? It is necessary to make an analysis to identify indirect costs associated with the provision of air transport services because in some companies in addition to shuttle other services which are able not to be charged to the user of the transport costs.

in flight_airplane_aviation law_oil_shahram shirkhani
Image courtesy of Thomas Hawk at Flickr.com

In conclusion, the airline industry is highly vulnerable to fluctuating fuel prices, since this greatly affects the cost of this service. Aviation fuel is the primary factor in the operation of airlines worldwide, therefore daily scientists and experts are looking for a new renewable energy sources as alternatives to transform the aviation a more profitable business.

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