Airlines Saving Money on Fuel, When Will Ticket Prices Drop?

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Southwest Airlines Jet

File photo


Think you’re saving a lot on fuel? Southwest Airlines sure is.

The airline’s CEO Gary Kelly said Thursday that it expects to save half a billion dollars in the first quarter alone, thanks to plunging energy prices. During a conference call later, the company’s CFO, Tammy Romo, said overall savings for 2015 would be $1.7 billion.

Unfortunately, the savings are unlikely to translate into cheaper flights for its customers.

“We’ll work hard to keep all of our constituents happy.” Kelly was referring to the company’s need to please shareholders in addition to customers and employees.

For airlines, most of the savings from cheap fuel so far are translating into strong profits. Southwest had record profits in 2014, beating Wall Street’s expectations.

Investors love the company. The stock is near an all-time high of $45 a share and was the best performer in the entire S&P 500 last year. Its momentum doesn’t seem to be slowing. Shares are up over 6% after Thursday’s earnings announcement.

But it’s not all bad news for Southwest’s customers. Southwest is the leading low-cost carrier in the U.S. and it is expanding more abroad. It added five countries to its travel list in 2014 and plans to fly to San Jose, Costa Rica, Vallarta, Mexico and Belize, City, Belize this year.

Southwest also remains a key hold out when it comes to airline fees. It still allows passengers to check up to two bags for free, even skis and golf clubs.

Customers seem pleased. Southwest filled 82% of its seats in the fourth quarter. The airline ranked second only to JetBlue in a customer satisfaction survey last year from the American Customer Satisfaction Index. That ranking could change now that JetBlue has announced it will cut legroom and start charging for bags.

While Southwest is flying highest in stock market gains, other airlines are also bouncing. Delta stock surged Tuesday when it reported strong earnings and said it expects to save $2 billion on fuel in 2015.