AVIATION AND RISING FUEL PRICES

Chart of the Day: The Real Cost of Rising Gas Prices
by Adam English, Associate Editor, Inside Investing Daily

If you think high gas prices are eating into your bottom line, try running an airline.

In 2012, the fuel bill for airlines is expected to be around $200 billion. That would account for more than 30% of total operating costs.

In the end, we all must pay the price.

By comparing oil prices to airline fares we can get a good idea of how the average passenger is getting hit by rising fuel costs.

A 12.1% increase in a six-month period last year was painful enough... but with oil prices predicted to stay above $100 per barrel throughout 2012 and a 4% rise in fare costs since the beginning of 2012 it will only get worse.

Southwest Airlines, the most consistently profitable U.S. carrier, has already announced that its first-quarter profits will be wiped out by rises in fuel costs.

As oil approaches $120 per barrel, airlines have no choice but to start making drastic changes to their businesses.

Airlines are already purchasing more efficient planes as quickly as their revenue allows. Routes are being dropped and passengers have fewer direct flights to anywhere except a major hub.

With crude prices creeping up past $107 per barrel, we can expect to pay through the nose for less-convenient routes well beyond the summer vacation season.

The only other possibility is a new round of airline bankruptcies.