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Brace yourself for airline changes

A lone traveler walks in the deserted baggage claim area for American Airlines at O'Hare International Airport in Chicago. Airlines will be cutting many domestic flights starting in September because of the high cost of fuel. Higher fares and fees are also on the menu.

A lone traveler walks in the deserted baggage claim area for American Airlines at O'Hare International Airport in Chicago. Airlines will be cutting many domestic flights starting in September because of the high cost of fuel. Higher fares and fees are also on the menu.

August 31, 2008

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A look at domestic capacity cuts

AirTran Airways: Plans for capacity to fall 7 percent to 8 percent between September and December.

Alaska Airlines: Its parent company has said the carrier's fourth-quarter mainline capacity will be cut by 5 percent compared with 2007.

American Airlines: Plans to cut its U.S. flying by up to 12 percent after the busy summer travel season ends.

Continental Airlines: Its plans include reducing flights in the U.S. this fall by about 10 percent.

Delta Air Lines: It has said it intends to cut domestic capacity by 13 percent during the second half of the year. A spokeswoman said a good portion of that would come during the fall.

JetBlue Airways: It has said it expects September capacity to be down 10 percent and does not expect to grow next year.

Northwest Airlines: It is planning to cut fourth-quarter consolidated domestic capacity by 7 percent to 8 percent.

United Airlines: Fourth-quarter mainline domestic capacity will shrink 16 percent compared with the previous year.

US Airways: It will reduce capacity 6 percent to 8 percent on domestic flights in the fourth quarter.

- Sources: Airlines' second-quarter earnings releases, AP archives, AP interviews, airline comments at investor conferences.

— 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 currently 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 flier, 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."

Fares way up

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, according to Rick Seaney, head of airfare research site FareCompare.com.

The cheapest roundtrip 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 roundtrip 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 during peak times like 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.

Capacity cuts

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 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, like 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.

Changing habits, services

Travelers are bracing for the impact of higher fares.

On a recent day at DFW Airport, passenger Vicki Schweiss, a classic rock DJ in Wichita Falls, Texas, said she might not be visiting her parents in Los Angeles quite so often this fall.

"If I can find a $200 ticket, I'll go," she said. "If there are fewer flights, that won't bother me, but if flights are really expensive, I just won't go or I'll go by myself."

At Phoenix Sky Harbor International Airport, passenger Melinda Larson, a retired municipal worker, said she can afford the fare increases. What bugs her, though, are all the new fees.

"I'd just rather they incorporate that in the fare," Larson said of baggage fees some airlines are charging. "And then you're good to go."

Several airlines are now charging fees for a first checked bag. Some have imposed a fuel surcharge on frequent flier reward tickets. US Airways is even charging for soda.

Already booked?

Cuts in the number of flights in the U.S. also could mean people who booked flights far in advance for travel after September might have to fly at a different time or, if a route has been eliminated by their carrier, they might have to find another airline to get them to their destination. But airlines don't expect that to be a big issue.

"A very, very small number of people would have purchased tickets for travel in September or thereafter before the flights were taken out of the fall schedule in May and June of this year," American spokesman Tim Wagner said.

If someone had purchased a ticket for a flight that is canceled later, airlines provide remedies for passengers. In American's case, the airline would put the passenger on another American flight, accommodate them on another airline or refund their money.

As for frequent fliers, capacity cuts could mean fewer award seats available at the lowest level of award travel. Wagner said that in American's case, people could pony up more of their frequent flier miles to guarantee they get a reward ticket for any available seat on a flight. Atlanta-based Delta recently announced a similar guarantee.

Fuel factor

While the price of a barrel of oil has fallen from a high of $147.27 in July to about $117 recently, that is not likely to slow the upward spike in fares, according to fare researcher Seaney. The current price of oil is still more than four times what it was in August 2002.

"I think if oil prices continue to go down, you will hear calls for relaxation of fuel surcharges, but that doesn't mean they won't hike base airfares," Seaney said.

The question on a lot of travelers' minds is how long will airlines be able to continue to raise fares. Airline analyst Ray Neidl of Calyon Securities said in the short-term that depends largely on the economy.

"That's the thing that will be tested this fall," Neidl said.

Comments

Flap Doodle 5 years, 7 months ago

toe, the electricity you use to operate the computer you used to post that message was generated by "inefficient and polluting" power companies. You must turn off the computer now to reduce global warming.

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toe 5 years, 7 months ago

Great news. The use of fuel inefficient and polluting airlines has got to decrease if global warming is ever to be reduced.

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