Airfares on rise. Are fuel prices going to effect your vacation plans?
Airfares are rising at their fastest pace in years as airlines are having more success in passing on the higher cost of fuel to their passengers.
The average price of a ticket on a U.S. airline, including baggage and other fees was 14 percent higher in March than a year ago. That’s the biggest 12-month increase and the highest average price for March in at least a decade.
The five biggest U.S. airlines together still lost a little more than $1 billion in the first quarter, but they appear determined to avoid a repeat of the multibillion-dollar losses in 2008, when they couldn’t recover rising fuel prices.
One big difference is that Southwest Airlines, which in 2008 typically balked at the increases, is raising its fares, too. Southwest has bumped prices up seven times since the middle of December and, in a recent conference call with analysts, signaled that more increases are likely.
Southwest was the lone big U.S. carrier to squeeze out a profit in the first quarter, though losses overall for Delta Air Lines, American Airlines, US Airways and United Continental Holdings were less than expected.
And further airfare increases are expected because airlines still need to recover more of their fuel costs and the current increases haven’t seemed to scare away many passengers.
Jet fuel prices passed $3 a gallon in late February, up 50 cents since the first of the year, and fuel prices are currently $3.15 per gallon.
In 2008, jet fuel peaked at $4.16 per gallon, according to the Energy Information Administration.
American lost $436 million in the first quarter of 2011, but that was better than analysts had expected and less than the $505 million the airline lost in the same period last year.
One promising sign for the airlines is that traffic has held up despite the fare increases due to increased business travel. Southwest Airlines is seeing reported record loads and passengers, and American Airlines reported its March traffic up slightly, 0.7 percent.
Passengers are seeing fare increases of $50 and more for a ticket compared with last year, and sharply higher costs for overseas travel. Fuel surcharges, which are more likely to be used on international flights than basic fare increases, are $450 for some round-trip tickets to Europe.
An airline industry trade group says that even with higher fares, more people will fly this summer than last year, especially overseas.
Petra Vaškových, May 18, 2011
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