Airlines stick to playbook as airfares rising again

Tuesday, July 24th, 2012 By

Jet

Surprising no one, a new round of airfares rising has been announced. Photo Credit: ChevronZ/Wikimeida Commons/CC-BY-SA

Airlines charge a lot in fees and usually don’t lower airfare rates very often, which many air travelers aren’t happy about. Airfares rising is a fact of life and many major carriers have indeed been raising airfares again lately.

Fourth round of airfares rising this year

According to CBS, United Airlines recently raised the base rate for airfares, adding $4 to $10, depending on the route, according to recent information from FareCompare.com. Airfares rising is the rule rather than the exception these days, and many other major carriers followed suit. JetBlue, Virgin and Southwest Airlines quickly raised their base rates soon after, according to USA Today. Joining them were Delta, American Airlines and US Airways, according to CBS.

It was the fourth time that base airfares have risen this year. Overall, seven attempts have been made to raise airfares, though only successfully three times before this latest raise.

Not all bad news

Though another $4 to $10 isn’t huge, several increases of that much over the course of a year can add up. Last year, fares rose nine times.

However, the news isn’t all bad. Some airlines are only raising rates on longer routes, as Southwest is excluding flights under 500 miles. Not everyone is going to feel the pinch though, as late August is typically when the slow season for air travel begins. Fewer people fly during fall and as a result, airlines typically cut back. Airlines usually cut rates by 10 to 20 percent during the slow season, which might save some travelers some cash.

Some increased fees may come in the form of airline fuel surcharges, though. According to the Los Angeles Times, a study by Cason Wagonlit Travel found that fuel surcharges haven’t diminished across almost the entire industry over the past few years, despite fuel prices dropping at times. In fact, fuel surcharges have increased 53 percent since April 2011, though fuel costs increased only 24 percent in the same period.

However, Airlines for America, the trade group for major air carriers in the U.S., notes fuel costs are roughly $3.05 per gallon, compared to $3.00 per gallon in 2010.

Slim margins

Fuel surcharges, along with any other ancillary fee, now has to be disclosed under new federal guidelines for airline ticket prices. How much airlines actually make per each fare is surprisingly less than one might think. One can find numerous reports on airlines reaping billions in profits, especially from ancillary fees like baggage fees, but the outlays carriers have to spend to get there can be incredible. Also, as the Huffington Post points out, airline fees are currently on the decline.

For instance, according to a 2010 CNN article, a one-way flight from Los Angeles to New York cost $506.62, on average, at the time of that article’s writing. Of that $506.62, just $33.34 was profit, roughly 6.6 percent. Almost $200 of that goes to labor and fuel, fuel accounting for the largest portion, at $97.85. A 10 percent increase in fuel costs boosts those costs to $23.67, a margin of roughly 4.8 percent. Prices might be high, but that’s the cost of being able to fly the friendly skies.

Sources

CBS

USA Today

Los Angeles Times

CNN: http://money.cnn.com/magazines/fortune/storysupplement/airline_costs/

Huffington Post :http://www.huffingtonpost.com/2012/07/23/airline-fuel-surcharges_n_1695301.html?utm_hp_ref=business

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