Business

<< Previous   of   Next >> Associated Press  (click to enlarge) The tail of an American Airlines aircraft is seen at left as a person walks by a passenger gate area in Terminal C at Dallas-Fort Worth International Airport on Tuesday in Grapevine, Texas.   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Thursday, August 28, 2008 Expect higher fares for airline flights Because of higher fuel costs, discount carriers aren't going to step in and encourage competition. Associated Press ATLANTA -- The grip U.S. airlines have on travelers' wallets is about to get tighter as carriers go ahead with plans to trim their domestic schedules because of the high cost of fuel. Executives acknowledge that despite the economic downturn, fares will rise, discounts available will be scarce, and routes and frequencies of flights will be reduced as domestic capacity is cut through the end of the year. The changes starting in September come on top of a litany of new charges -- for luggage, drinks, pillows and other amenities -- announced by some airlines earlier this year. "Airline travel is airline travel. It's been bad for a long time," Chris Bardasian, an American Airlines frequent flyer, said recently at Dallas-Fort Worth International Airport. "I suspect prices will go up, fewer people will travel, and if you're willing to pay the price it will be fine." There were sharp capacity cuts during prior weak economic periods in the early 1990s and between 2001 and 2003, but fares went down as discount carriers moved in and filled the void, offering more competition, analysts said. But the high price of oil, airlines' limited ability to further cut certain costs and the fact that many of the discount carriers are facing the same difficulties as the big carriers make things different this time, analysts said. "Despite this sluggish U.S. economy, the general demand picture is better than it was post-9/11," said Standard & Poor's analyst Philip Baggaley. "In addition, you have this consistent response across the board of airlines raising fares and adding fees." On average, domestic fares between large metro cities are already up roughly 16 percent since Jan. 2, while fares between small cities are up roughly 37 percent year-to-date, said Rick Seaney, head of airfare research site FareCompare.com. The cheapest round-trip ticket with a 10-day advance purchase, for example, on an American Airlines flight from Chicago to New York cost $258 on Aug. 26, excluding government and airport fees. That was an 87 percent increase from the $138 it cost on Jan. 2 for a similar advance purchase, according to FareCompare.com. The cheapest round-trip ticket with a 21-day advance purchase on a United Airlines flight from Denver to Washington cost $382 on Aug. 26, excluding government and airport fees. That was a 37 percent increase from the $278 it cost on Jan. 2, Seaney said. Recently announced airfare sales for travel during the traditionally slow fall season will be harder to come by as more capacity comes out of the system in the last four months of the year. "If somebody sees a good fare, they should grab it," said Kevin Healy, senior vice president of marketing and planning for AirTran Airways. Booking early for travel during peak times such as the holiday season generally can get you a cheaper ticket than waiting until the last minute. But, airlines usually do not offer fare sales for travel over the holidays. American Airlines, United Airlines, Delta Air Lines, Northwest Airlines, Continental Airlines, US Airways, JetBlue Airways, AirTran and Alaska Airlines plan to cut domestic capacity during the third and fourth quarters by single- to double-digit margins. JetBlue, for instance, in September will end service between several cities, including Boston to San Francisco and Washington, D.C., to Las Vegas. Southwest Airlines Co., which had resisted the kinds of capacity cuts being made by other carriers, will end service in November between Kansas City and Sacramento, Calif., and between Oakland, Calif., and Tucson, Ariz. Some airlines, including JetBlue and Southwest, are adding or expanding service to states where other carriers are reducing service, such as Florida. However, Southwest said recently that it will eliminate nearly 200 flights early next year as it struggles with high fuel costs and a weakening economy. Fewer overall seats in the air means planes that remain will be fuller, which gives airlines pricing power to raise fares. "The reality is -- and I don't want to diminish this -- the industry is going to have to cover its costs," American Airlines chief Gerard Arpey said in an interview. Travelers already are bracing for the impact of higher fares.

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