Tuesday, October 28, 2014
Delta Airlines was one of the first to hike fares last week, despite falling fuel prices.
The major airlines in the U.S. reported their earnings last week, and they are staggering.
If you thought lower fuel prices would lead to lower airfares, think again.
What Goes Up, Doesn’t Come Down
U.S. airlines are raising fares on domestic flights even though they are getting a windfall from lower fuel prices.
Last Thursday, a trial-balloon hike of $10 round-trip implemented by Delta stuck after Southwest Airlines joined other carriers Friday in bumping fares up.
Both United Airlines and American Airlines matched it Friday evening making for a very quick success, said FareCompare.com
All the major airlines are reporting record load factors with Southwest Airlines bragging that its flights out of Dallas’ Love Field are running over 90% full.
So what we have here is the major carriers doing very well holding down capacity and raising fares and packing planes.
Southwest Airlines, which used to be the friend of low fares and market expansion, is now just like the other major carriers. It seems that the hopes of flyers who want reasonable fares will now fall to Spirit, Frontier and Allegiant.
Heading into the holiday travel period, the airlines expect even cheaper fuel, due to a dive in crude oil prices.
Jet fuel price, an airline’s biggest single expense, has dropped by about one-fifth since mid-June.
Yet holiday travel will be more expensive in 2014 than in 2013.
A new study by Expedia reports that domestic fares for the Thanksgiving holiday are up 17% over last year, to an average of $467. Christmas airfares are up 2% to an average of $493, the travel site said.
Flights over Christmas averaged $482 in 2013 and are averaging $493 in 2014, a 2 percent hike.”
Carriers raised fares five times this year and attempted to do so 20 times.
So even as oil prices dropped, instead of passing the savings onto the customer, the airlines participated in ramping up fares.
Full of Bad Cheer
The airlines like to say that flying has never been cheaper, and they are just starting to dig out of the hole from the 2000s, which resulted in billions of losses. But this is probably the most misleading argument about airfares today.
– All the major carriers except Southwest took a trip through bankruptcy court and unloaded most of their debt onto unsecured creditors, wiping out their shareholders and strong-arming their employees into accepting reductions in pay, benefits and working conditions.
– Adjusted for inflation, each major airline is saving billions in equivalent labor costs achieved though outsourcing – everything from menial jobs in airports, to regional “Express/Connection” flights with contract pilots, to maintenance and aircrft fuelers, to call center employees.
– Service has decreased. A 150-seat aircraft today typically has no more than three flight attendants, down from five-six years earlier. Additionally, complimentary meals are no longer provided to main cabin passengers except on transcontinental flights.
– Fares today do not include ancillary fees, such as those for baggage, seat assignments, meals, etc. that consumers pay extra for now. Tickets have also become more punitive in terms of change and standby fees.
– Aircraft load factors are expected to be in the upper 80th percentile, compared with barely 50 percent years earlier.
Fuel Surcharges Have Nothing To Do With The Price of Fuel
On Monday the price of crude oil fell below $80 a barrel for the first time since mid-2012 as energy prices continue to plummet around the world.
So why aren’t the airlines reducing the so-called fuel surcharge? Isn’t this just another name for a fare increase?
Fuel surcharges are a convenient way to raise and lower all fares in a market by a mixed amount without having to refile each fare, explains the blog View From The Wing.
Only a few airlines in the U.S. and a few partner carriers impose these fuel surcharges on customers booking award tickets. On flights to Europe, your ticket breakdown still shows fuel surcharges of usually several hundred dollars.
The Huffington Post calls it a pure money grab and rip off that has gone far beyond the price of fuel.
There was a class action suit filed in 2012 against British Airways for failing to disclose what portion of their fees were attributable to fuel surcharges.
FlyersRights believes some re-regulation of our air transportation industry is needed. The existing model doesn’t work, except for Wall Street profits.