Airline fuel prices...?

Question

I'm a US citizen working in Europe and recently was watching the news at home mentioning how airlines were upping travel prices because of fuel prices. I can fly distance-wise (with euro conversion) cheaper here than in the states and gas in Italy (my area) costs 1.5 Euro a liter (with conversion from EU to USD and 3.79L=1Gal. that's @ 8.7 dollars a gallon). I realize that jet fuel is priced differently and gas prices vary throughout the EU, but the general fuel price is much higher. What I would like to know is: do you think the airlines are just taking an easy excuse, does the EU comp the airlines (and if so at what level), or is there some other idea out there that could explain this?

Answer 1

A primary reason why fuel prices in Europe are so much higher than in the US is due to taxation -- in the UK, for example, a liter of gasoline is hit with taxes of 58p -- which works out to just over US$4 per gallon -- and the cost is then increased further by the addition of a 17.5 percent value-added tax.  (Comparatively speaking, the highest combined fuel tax rate in the US is slightly less than 75 cents per gallon.)  In other words, were it not for taxes that were many times higher, the cost gas wouldn't be that much more there than it is here.

That being said, though, many airlines in Europe benefit from exemptions from fuel taxes.  Even with that in mind, though, the cost of oil will have an effect on prices -- as costs increase, it will have to be made up somewhere.  And airlines -- who have long operated under a business model that worked off of cheap oil, because that's what we had for so long -- are adjusting accordingly.

Answer 2

European airlines are in a much better position to weather the storm as they enjoy the benefits of a strong euro, newer fleets and recent consolidations.

European carriers buy that fuel -- priced in dollars -- with now much stronger euros. A euro is worth $1.5788 now, up from 85 cents seven years ago.

And European airlines may offer better deals to passengers