Airfares are rising, planes are packed and carriers are abandoning less-profitable routes. What's to blame? Climbing fuel prices. And there will be no relief in the immediate future, according to an analysis released by the Federal Aviation Administration. "Planes will remain crowded," said the report, and "shrinking capacity will further lift fares higher in 2012."
The nation's airlines buy about 48 million gallons of fuel each day at a price that jumped nearly 40 per cent in the last year. A gallon of jet fuel sold for an average of $3 in 2011, up from $2.15 in 2010. And although airlines are flying more energy-efficient planes, fuel represents about 35 per cent of the industry's total operating costs.
"Fuel prices are volatile," said John Heimlich, chief economist for Airlines for America, an industry trade group based in Washington. "Fuel is our biggest cost, and we don't know what it's going to do." Airfares jumped about 8 per cent to $346 on average in 2011, from $320 in 2010, according to Airline Reporting Corp., which processes ticket transactions for 190 airlines worldwide. Last year the industry put through nine fare hikes.
This year, the largest airlines have pushed through two fare hikes so far, each for $10 to $20 per round trip, and it's still the slow season between holiday travel and spring break, when there is normally less chance of fare increases. The higher fares have caused many passengers to change travel tactics.
Mark Zoeckler, a technology and innovation consultant from Rancho Palos Verdes, said he now often flies on low-fare airlines such as JetBlue Airways or Southwest Airlines to save money, even though it means he won't collect loyalty miles from carriers such as American Airlines and United Airlines. Zoeckler said he was also more likely to stay home and meet clients via online video conferencing.
Although the FAA report predicted rising airfares and growing demand for air travel, it did not foresee much growth in airline capacity in the short term. It said airlines would continue to depend on "ancillary revenues," referring to consumer fees to check bags and buy onboard food or entertainment.
Major US airlines collected $12.5 billion from such fees in 2011, up from $6.7 billion in 2010, according to a joint study by Ideaworks, a Wisconsin consultant on airline fees, and Amadeus Corp, a Madrid technology company for the travel industry. Airfares are not rising as fast as fuel costs, partly because airlines realise that passengers will use alternatives if flying becomes too expensive.
"There is a point where consumer won't go," said George Hobica, founder of the travel Web site Airfarewatchdog. "They will stay home. They won't fly."
Los Angeles Times
