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March 21, 2022

Airline lets travellers gamble over the cost of airfare

Consumers find the most prominent consequence of higher fuel prices at the gas pump, but it’s not the only place we get stung.

1230974_piper_clipper Surely, as the cost of gas continues to skyrocket across North America, so too has airfare. Airlines, terrified at what unrest in the Middle East and Northern Africa has meant for the price of oil, have passed the burden onto us: according to the Air Transport Association of America, airfare jumped 13 per cent last month compared to what it cost in February, 2010.

At least one airline, though, wants to play a game. A small Las Vegas airline is asking consumers to buy a ticket that’s price may go up or down depending on the future cost of fuel.

Allegiant Air, an outfit that serves about 70 global destinations, has made headlines with its proposal of a variable-price ticket system, which essentially asks travellers if they’re willing to gamble on the future price of fuel.

According to Allegiant’s plan, passengers would be able to purchase a traditional fixed-price ticket as usual, but they’d also have an option to purchase another ticket – at a discount – that could have its cost fluctuate over time. In this case, customers would pay less up front but face risk in the future. So, if the price of fuel goes up by the travel date, they’d pay more (up to a pre-disclosed, to be determined cap); if the price of fuel goes down by the travel date, they’d get cash back.

“It’s an airline based in Vegas, so people are in a gambling mood I guess,” one travel agent source told the Associated Press.

At the heart of Allegiant’s proposal appears to be one giant red flag, which is to say – why would anyone bet against the cost of fuel going up? Generally speaking, fuel prices are probably going to increase, however marginally, as time goes on, much like any other consumer item.

But that’s a long-term outlook, and when you think about buying airfare – one, two, three months in advance, in most cases – that may be a time window that could see fuel prices go up or down on a relatively even keel. In essence, perhaps there’s a fair chance in the short-term that fuel prices could fluctuate for or against the consumer.

Would you ever gamble on the cost of airfare? Does the promise of a cheaper ticket in the future outweigh the risk that you might have to pay more when it actually comes time to fly?

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...