By JOE SHARKEY
11/13/2007
AS a major holiday travel season approaches and airlines scramble to cover soaring fuel bills, air fares are going up. And this time, they’re likely to stay up.
That’s because the big carriers and their low-cost competitors are all in the same boat – or plane. All are balanced on a knife’s edge of profitability. With passenger demand staying firm and most planes full on most routes, the airlines for the first time in many years are raising fares “simply because they can,” said Terry Trippler, an online air fare analyst.
Since Labor Day, major airlines have raised one-way fares eight times. And most of the increases – like the $5 increase initiated late last week by United Airlines and promptly matched by most competitors – have stuck.
“This is definitely accumulating,” said Rick Seaney, chief executive officer of FareCompare.com, a Web site that tracks the universe of airline fares to issue e-mail alerts to subscribers and to provide real-time and historical data for comparison shopping. “A business traveler who was paying anywhere from $250 to $300 one way before Labor Day is paying anywhere from $30 to $35 more one way now.”
In the past, airlines often played a cat-and-mouse game with air fares, quietly putting in increases of $10 or $20 across the board or on selected routes. But more often than not, those higher fares failed to stick when competitors ended up not matching the increases.
Several major changes in the system accelerated this year to change that interplay. Even with record delays and cancellations, air travel demand continued to rise to record levels.
Meanwhile, with little profit built into domestic coach fares and with fuel and other costs rising, airlines cut back on the number of seats they flew domestically. At the same time, major airlines put more seats into lucrative international routes.
One consequence of the cutback in domestic capacity was that by the summer, airlines were reporting their highest ever domestic load factors. Load factors are the percentage of available seats sold.
Airlines are now much more free to raise fares because “they have all their seats full anyway” while passenger demand remains firm, Mr. Seaney said.
“A few years ago, you would have had load factors in the high 60s and low 70s, but when they got up to over 90 percent this summer, which means that most airplanes are taking off full, that became a deal changer. The supply and demand curve used to favor consumers, but now it’s on the airlines’ side,” he said.
FareCompare.com is a free site. Its revenue comes from advertising, Mr. Seaney said. It doesn’t book tickets. FareCompare collects its raw data throughout the day from the Airline Tariff Publishing Company, a worldwide company that receives all fare filings from more than 500 airlines.
“On any given day, hundreds of thousands of air fares, even millions, can change,” Mr. Seaney said.
The Air Transport Association, the airline trade group, said yesterday that it is projecting a 4 percent increase in passengers during the Thanksgiving holiday, which starts Friday and continues through Nov. 27. The trade group said that “planes will be, on average, close to 90 percent full.”
The system has no slack to accommodate passengers who miss connecting flights or cannot find a seat on an alternate flight. Northwest Airlines, reacting to the industrywide outcry over the many instances this year of passengers being stranded on planes for long hours on tarmacs, announced new provisions to “minimize service disruptions” during the holidays.
Among them are advance notification of potential disruptions. But Northwest also announced a plan, similar to one adopted by JetBlue after thousands of its passengers were stranded at Kennedy Airport during an ice storm last February, to give its captains authority to coordinate with its operations center and “initiate a plan for passengers to deplane” after three hours of waiting on a tarmac.
Meanwhile, Mr. Seaney said that unless fuel prices ease, the airlines have little choice but to keep raising fares. “In the last three quarters, the airlines have done real well,” he said. But if they don’t raise fares enough to cover fuel costs, “they could be back in bankruptcy in a heartbeat.”
E-mail: jsharkey@nytimes.com
Source: NEW YORK TIMES
Date: 2007-11-13