On the Spot: What’s driving up airfares?
Question: What in the world is going on with airfares? I’m seeing airfares of more than $1,000 to European destinations and about half that for New York and Boston. Say it isn’t so. Or at least say it won’t last.
Answer: I’m getting this question from leisure travelers who are seeing summer fares that may put their vacations on ice.
And — are you sitting down? — it’s probably not going to get better any time soon.
Airfare experts point to three factors that are driving costs.
Fuel. That’s not a surprise to anyone who has filled up at the pump lately. (Sixty bucks to fill my car? Really? Really.) Five years ago, oil was going for $72 a barrel at summer’s end. On March 16, it was at $107 a barrel. So we’re paying about a third more these days, and when you multiply that by the 16 billion gallons of fuel airlines used in 2011, it’s a world of hurt.
Airlines, mostly foreign ones, are tripping all over themselves to add fuel surcharges. (Domestic carriers tend not to do this, but foreign ones seem to do it with abandon.)
But don’t blame it all on fuel prices. We seem also to be having a crisis of capacity and competition.
Fewer seats. Airlines have been cutting seat capacity for the last several years by taking planes out of service. In 2000, flights were about 72% full; last year that number increased to about 81%. In June alone, flights were 85% full, which explains why you felt crammed in, cattle-car style.
Decreased competition. Couple fewer seats with the recent merger mania — United/Continental, AirTran/Southwest, Northwest/Delta — and you have significantly fewer carriers. Less competition is rarely an incentive to lower prices.
So how bad are ticket prices? On March 23, these were the lowest prices I could find for a round-trip ticket departing LAX on July 27 and returning Aug. 6: $540 to Boston (Virgin America), $580 to New York’s JFK (JetBlue), $1,285 to Paris (Turkish Air) and $1,358 to London’s Heathrow (Finnair). By the time you read this, these fares may be long gone because cheap seats tend to go first.
If you look at international fares from five years ago, you’re not paying that much more. On July 8, 2007, our airfare chart showed a flight to Paris for $1,265 in July — only $20 less than a current fare. Adjusted for inflation, that $1,265 fare would be $1,389 in today’s dollars. The one fare that’s way out of line is London, which showed up five years ago as $842, or $924 in 2012 dollars. Note that the July 27-Aug. 6 dates correspond with the Olympics in London, which are a hot ticket.
It is domestic fares that sting most of all. Our airfare chart from Aug. 5, 2007, showed a round-trip airfare from LAX to Boston of $359. Even adjusted for inflation, today’s cost would be $394, about $146 less than the Boston fare I found for a midsummer trip.
Travelers are muttering to themselves, said George Hobica, the founder of Airfarewatchdog.com, which prides itself on finding low fares. “We have a price-conscious audience,” he said, “and we’re getting a lot of grief.” The question Airfarewatchdog faces is this: Does it wait until fares come down to post something for its readers (“It may never happen,” he said), or does it post these higher fares? Which, of course, is our dilemma about buying and flying. Do we wait, or do we vacate the vacation? Or is there some other strategy? To find out what experts suggest, turn to this week’s More for Your Money.
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