For fliers, fares are still ascending
For many airline travelers, it’s been a summer of hell. And hell just got a bit more expensive.
Over the weekend, discount leader Southwest Airlines raised fares as much as $10 each way to offset higher fuel costs, setting off a wave of increases across the industry.
But midway through the summer travel season, the prospect of paying more to wait in long lines, suffer through awkward security checks and fight for elbow room on packed flights hasn’t been enough to keep travelers at home.
“Frustrated or not, there’s nothing you can do about it,” said Linda Wambold, who was at Los Angeles International Airport on Monday, heading home to Kansas City, Mo., with her family after vacationing in Southern California.
The headaches aren’t likely to get better any time soon. A record 209 million passengers are expected to fly domestically this summer, up 3% from last year.
“Leave plenty of extra time when you travel and hope you can reschedule your plans if need be,” said Frank Boroch, an airline industry analyst with Bear Stearns & Co. in New York.
“Fall will probably see some relief from fewer people traveling, but the ongoing issues will persist and in the winter, you get into inclement weather and holiday time,” he added.
Fare increases, meanwhile, are becoming almost as routine as flight delays. Southwest’s most recent hike marked the third time the folksy airline kicked up prices this year and its ninth increase in the last 19 months.
According to the trade group Air Transport Assn. of America, the airlines’ costs rose 10% in the first quarter of 2007, mostly as a result of a 12.6% increase in the cost of fuel.
To compensate, airlines have been raising fares and jamming more passengers on fewer planes.
Airplanes are now flying 90% full or more. In 2000, planes were typically 75% to 85% full, Boroch said.
That kind of load can cause bigger problems that involve more of the workings of the system, said Paul Hudson, executive director of the Aviation Consumer Action Project. The group, founded by Ralph Nader in 1971, lobbies for passenger rights, including government-regulated capacity limits for airlines.
Loading and unloading more people and luggage per flight usually means longer delays. In May, before the summer crush, the industry’s on-time performance of 77.9% was better than April but worse than a year earlier.
That follows a long-term trend of increasing delays, according to the federal Bureau of Transportation Statistics. From April 1 to June 30 this year, domestic flights were on schedule 77% of the time.
During the same period in 1997, 80% of flights were on time. And in 1988, the earliest period of quarter reports, on-time arrivals were at 83%.
Fuller planes also present bigger problems when a flight is canceled because it means trying to rebook more passengers on other flights that also are nearly full.
“From an operational and from a profit-maximization standpoint, you would prefer fewer passengers paying higher prices,” Boroch said. “But if you can’t raise prices sufficient to cover your costs, you’re left with trying to cram as many people on board as you can.”
The 10 biggest airlines are on track collectively to double last year’s $1.5 billion in profit, Boroch estimates. But the industry is still clawing its way back from the 9/11 terrorist attacks and the downturn that followed. The industry lost $35 billion in that calamity, Boroch said.
“There’s a lot of damage that needs to be repaired,” Boroch said. “You really need to sustain for several years before airlines can get healthy again and reinvest in the business.”
In the meantime, fliers have good reasons for putting up with travel aggravations.
Although nationally the average price of self-serve regular gasoline has dipped from its peak six weeks ago of $3.218 a gallon, high fuel costs make flying more cost-effective than driving unless a group is traveling, Hudson said.
“People didn’t expect that $3-plus gas prices have actually made air travel more cost-effective, not less, for many people,” the activist said. “I don’t think price increases deter anybody at this time. Obviously, passengers want to keep prices down, but what they’re most upset about is poor service and unreliable service.”
Driving a car, he said, costs roughly 55 cents a mile, not including tolls. Even with fare increases, flying costs roughly 12 cents a mile.
For years, Southwest was inoculated against rising fuel costs because the airline purchased futures contracts several years before the recent sharp rise, gambling correctly that fuel prices would rise.
The practice saved Southwest hundreds of millions of dollars as oil prices climbed and allowed it to remain among the few carriers to stay profitable as the industry struggled in the aftermath of 9/11.
But as high oil prices sent the costs of those futures contracts soaring, Southwest has scaled back those purchases and is preparing to pay market rates for fuel.
Southwest’s weekend increases amount to paying $2 more for a round trip between LAX and Las Vegas or $6 more on a round trip between LAX and Albuquerque. It works out to $10 more on a round trip between LAX and Nashville, and $20 more for a round-trip ticket between L.A. and Baltimore.
Taken by itself, that rate hike didn’t sound terrible to many Southwest travelers at LAX on Monday.
“I’m not pleased that they raised their fares, but I like Southwest. They’re my favorite airline,” said Linda Thomas, a registered nurse from Anaheim who was making a regular pilgrimage to St. Louis to visit her mother. “I’ll be stuck with their increased fares.”
But not all passengers were so nonchalant.
Terry McNutt, a 54-year-old truck driver from Detroit, flies two or three times a week for work on his company’s dime.
His leisure travel is another matter.
“If it gets too expensive, I guess I’ll just stay home,” he said. “I can put my money to use in other places.”
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