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Delta Profits Soar As Oil Prices Drop

MINNEAPOLIS (WCCO) -- Fuel prices mean a few extra dollars in drivers' pockets, but when you're using millions of gallons, the savings really add up.

Delta Airlines announced Tuesday that it expects to save $3 billion in fuel costs this year compared to last. But will it mean cheaper flights for travelers?

If it seems like airline ticket prices are a moving target, you're right.

"We've got much lower prices, lots more people flying and generally lowering of quality because the airlines are a viciously competitive cost business," Professor George John of the Carlson School of Management said. "Throw in the volatility of gas prices and oil, and you can only imagine that prices are going to be just as volatile."

Delta credited lower fuel costs to a record financial year for the airline. The fourth quarter yielded a reported $926 million dollars in earnings for the company.

"Delta has had a bit of a run as of late, and that shows in the results," John said. "Unfortunately, there is no connection between the health of the airline and what you and I will pay for tickets."

So what will drive airline ticket prices? According to John, it's all about competition between airlines.

"If Sun Country puts a flight on a route, Delta will lower their prices to match," he said. "It's much more a function of competition than anything else."

What Delta does with the profit is yet to be seen, but John says in the long arc of the airline business, it's a tough and unprofitable industry.

"I wouldn't say this means a whole lot going forward, because the business is so volatile," John said. "It's like retail: You never know what's going to happen from quarter to quarter."

A word of advice from Prof. John: The days of booking early to get the best price are gone. Pricing is so volatile that flyers should choose a price they are comfortable with and buy then.


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