Recently Allegiant Air notified the Department of Transportation that it may add a new type of pricing to its website. This new fare type might appeal to those who like to speculate on oil pricing, because it is based on oil futures and hedging the price.
Allegiant is going to offer a low upfront purchase price that will get you on the plane – but with a provision that if fuel prices go up, you will have to hand over extra money at the time of departure. At this time, the airline hasn’t disclosed how much that variable will be. If, on the other hand, the price of fuel drops, you will receive a partial refund. Again, not a lot of details yet as to the amount of money involved.
It is an interesting idea that I believe will eventually show up on their website, and probably sooner rather than later. The airlines are doing their utmost to shed as much of the risk and expense from the basic ticket price as they can, and push it on to the consumer via fees and different pricing approaches. They do have to get the DoT’s approval and that will require them to explain a lot of details of how anyone can monitor the ups and downs and ensure that passengers aren’t being taken advantage of. Assuming they can get the DoT’s approval, I think it is a given that they will roll it out.
Will other airlines follow suit? That’s a tough call and I think much will depend on what the price of oil does over the next few months. Remember, Allegiant is the airline who first started charging for bags, selling premium seats and boarding, for booking a reservation and so forth… and the industry eventually followed them on many of these ideas.
It does bring home the point of how far the airlines are willing to go in order to be able to advertise a low price and yet still collect enough money from the travelers to make money.