Leave it to a Las Vegas-based airline to propose a new kind of airfare that depends in part on betting on the price of oil.
Allegiant Air has suggested to the federal Department of Transportation that it allow airlines to sell tickets whose prices could be adjusted up to the moment of boarding based on fuel prices.
Allegiant, whose passengers are mostly leisure fliers who take the airline from mid-size communities such as Bellingham to resort cities such as Las Vegas and Phoenix, wants to insulate itself from the risks of oil price spikes by sharing the risk with its passengers.
The airline would offer two kinds of fares, a fare that locks in the price of the ticket and the lower-priced variable fare linked to oil prices.
If the price of fuel rose dramatically between the ticket’s purchase and the flight, the airline would levy an additional charge on the passengers. Most Allegiant passengers reserve their tickets months in advance.
Airlines suffered mightily in 2008 when oil prices hit $147 a barrel, but fared better until recently when oil prices, which fell steeply from that high, began rising again.
Some airlines, including SeaTac’s Alaska and Dallas’ Southwest, buffer the swings in fuel prices by hedging their future fuel purchases.
Allegiant is particularly vulnerable to fuel price swings because its fleet is mostly composed of older, less fuel-efficient MD-80s aircraft and because it doesn’t hedge its fuel contracts.