29 July 2010

RIP: era ending for cheap airline fares

The good news for the airlines is that they’re profitable again but the bad news for consumers is that ticket prices are likely to rise, and cheap air fare is going to be much harder to find, say experts.

"The six biggest U.S. airlines earned about $1.3 billion in the second quarter, and more profits are expected for the rest of the year. Even so, airlines are still woozy from the one-two punch of record-high fuel prices followed by a recession," says the AP.

Those six big carriers lost $22.7 billion in 2008 and 2009. And that's just a portion of the $63.35 billion that U.S. passenger airlines lost from 2001 to 2009, according to the Transportation Department.

Airlines are pulling back on deeply discounted fares now that they're making money again.
Already, fares have jumped 18 percent this summer as compared to the same period a year ago, according to the International Air Transport Association.

So what can airline travelers expect in the near future? Some observations:

---The airlines are hooked on fees after two years of using them to overcome, first, high fuel prices and then slumping travel demand. A new study shows that worldwide, carriers took in $13.5 billion from fees in 2009, a 43 percent jump in just one year. "Fees are going to stick and they're going to become more pervasive," said Jay Sorensen, a former airline executive who is now president of consulting firm IdeaWorks, which did the study on fees.

---Airlines have been able to boost ticket prices too. Summer fares are up.

---Travel demand will taper off as fall approaches — Continental Airlines is already seeing that. Still, airlines will try to avoid slashing prices. Rick Seaney, CEO of FareCompare.com, says the airlines are getting better at waving sale prices in front of customers but selling most seats at higher fares.

---Planes are stuffed like never before. Including regional flights, Delta filled 88 percent of its seats in June, Continental sold 87 percent, and American 86 percent — that's about 2 percentage points higher than last summer. Full flights are expected to remain on the horizon this summer.

---"Leisure demand has been strong, and we expect it will remain so throughout the remainder of the summer," Continental CEO Jeff Smisek told analysts.

---Normally when airlines start making money after a slump, they're tempted to add new flights to snag returning travelers. This time might be different. Sluggish bookings and concern about the weak economic recovery will put pressure on airlines not to add flights that might operate half-empty.

---Several large U.S. airlines are in the middle of labor negotiations that could lead to higher costs and even disruptions for travelers.

---The most acute problems are at American, where flight attendants and some ground workers are talking openly about possible strikes this fall. American's parent, AMR Corp., spends 30 percent of its revenue on labor compared with 18 to 22 percent at the other big airlines, according to the AP.

---AP writes that when airlines have made money in past years, they've been "tempted to add new flights to snag returning travelers. [But] this time might be different. Sluggish [fall] bookings and concern about the weak economic recovery will put pressure on airlines not to add flights that might operate half-empty."

All in all, tough times are likely to be ahead for airline passengers accustomed to cheap flights.

By David Wilkening

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all profits in the history of commercial aviation

It would be interesting to know if the TOTAL profits of ALL the airlines in the ENTIRE history of commercial aviation equalled the losses reported in the last eight years or so. My suspicion is that, even allowing for inflation, that they do not.

By Charlie Funk, Thursday, July 29, 2010