Air fares and exchange rates

Abstract

The Bretton Woods international monetary system, with fixed-parity rates of exchange, ended in March 1973. The author examines the problems airlines and tour companies have faced since then in adjusting their tariffs for value fluctuations in floating currencies. Many airlines favour the use of the International Monetary Fund's Special Drawing Right as an international unit of account, but there are unresolved difficulties in applying this worldwide. Currency problems have been particularly troublesome within Europe, where adoption of the new European Currency Unit might provide a solution.