A Vegas-based airline has found a way to hedge against rising fuel prices: Under a tentative plan, the price of an Allegiant Air ticket would depend on the cost of fuel.
Under the plan, passengers could choose between a traditional fixed-price ticket and a discounted, variable-price one. If the price of jet fuel falls by the departure date, customers with a variable ticket would get cash back. If the price climbs, they would pay more, up to a pre-disclosed cap.
Airlines regularly lock in part of future fuel costs to protect against oil price rises. “Allegiant’s plan, in a way, passes that decision — and risk — on to customers,” says the AP.
Allegiant recently disclosed the new pricing option in a letter to the government opposing a rule to prevent airlines from increasing prices after purchases and suggesting this program as an alternative.
The airline doesn’t have any immediate plans for the new pricing option but wants the flexibility to offer it in the future, according to an Allegiant spokeswoman.
"I give them points for being creative," said Henry H. Harteveldt, principal airline analyst with Forrester Research. But he added it was confusing.
I
t’s difficult, for example, to figure out the price at booking because of various add-on fees.
Will the bigger airlines follow suit? Probably not, experts say.
Allegiant caters mostly to leisure travelers.
The price of jet fuel has risen nearly 50 percent in the last year.
By David Wilkening
