Travelers should expect 'pricey' summer airfares
Summer airfares are climbing as airlines pass on higher fuel costs and cut back on flights, running counter to the long-term trend.
The cost of air travel, when adjusted for overall inflation, has generally fallen for years. But now airlines are trying to better match their fares with their costs and achieve what is often so hard for them to do — make a profit. Many Minnesota travelers are trying to figure out how, or if, they can afford to fly this summer.
Every summer, Colin Steen of Maple Grove and his family have flown back home to Saskatoon, Saskatchewan. But that might change this year.
"Tickets are about $850 apiece right now," he said. "For four, that's a lot of money."
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About $3,400 expense in airfare for four. That's $1,000 or more than Steen is used to spending on airfare for the family trip.
"Delta is the only airline that flies into Saskatoon," he said. "So, we know it's not going to be the cheapest flight out there. But this year, it's quite a bit more expensive than in years past. We'll probably end up driving."
That will be a two-day, 1,100 mile road trip, each way, with a stop in Minot, N.D.
Airlines have to raise fares to offset rising fuel costs. And they are freer to do that these days. Since they have been cutting back flights, they have fewer seats to fill, meaning they are less likely to have to sell some of them cheap. And a string of big mergers have reduced competition. That may be bad news for consumers, but it's good for an industry that has lost money for most of the past decade.
The industry trade group Airlines for America says fares are up about nine percent overall this year. But the organization says that adjusted for inflation, fares had fallen about 16 percent in the prior decade.
"You know the airlines in 2011, eked out a 0.3 percent profit margin," John Heimlich, chief economist for Airlines for America. "It's hard to see that revenues are in great excess of the cost of operation."
Heimlich said airlines saw an all-time high in fuel prices last year. And so far this year, he said jet fuel prices are up 10 to 15 percent.
"That is not a formula for growth in air service or increased profitability," Heimlich said.
Perennially profitable Southwest Airlines is among those suffering. The low-cost carrier. which serves Minnesota and has earned a reputation for driving down fares, has been raising fares to offset soaring fuel costs. The carrier says it won't earn a profit for the first three months of this year.
Fare hikes by Southwest and similar low-fare carriers have encouraged Delta and other airlines to boost their fares.
Delta, which dominates the Twin Cities airport, just reported better-than-expected revenue for March but analysts still expect a small loss for the first three months of 2012.
During a conference call with Wall Street analysts, Delta executive Glen Hauenstein said the carrier is gaining pricing power.
"We've had a lot of traction eliminating some of the lowest fares," Hauenstein said.
Travelers who want good deals on airfares are going to have to hunt for them, and be ready to grab good fares quickly.
Delta CEO Richard Anderson told Wall Street the carrier is committed to "permanently fixing" its business model.
"Our 2010 and 2011 results show that our plan is working," Anderson said. "Twenty-twelve is setting up as another good year for Delta. We are committed to grow and diversify our revenues, cover fuel costs in our prices, while taking a disciplined approach to capacity, costs and capital spending."
Travelers who want good deals on airfares are going to have to hunt for them on a variety of travel websites and be ready to grab good fares quickly when they pop up.
Kevin Turner, a spokesman for the Kayak travel website, suggests trying unconventional destinations, such as the Caribbean, Florida, or the southwestern U.S. to get lower fares for summer travel.
"Don't go with the flow," Turner said. "Think of some alternative."
But many families looking to visit relatives during the summer don't have such flexibility. And summer fares tend to be pricey, said Tom Parsons, who runs BestFares.com.
"As we go into the summer months, the inventory is going to become very tight," Parsons said. "June 15th to August 15th, probably almost every school in America is going to be out. Family travel is going to go up."
Parsons advises travelers to fly mid-week and, if possible, after mid-August. And pray there is enough competition to keep fares somewhat in check, he said.
"It just depends on where you're flying to and who's flying the route," Parsons said.
Come June, Parsons expects there will be fare sales for domestic travel in late summer and the fall. Travelers can also save by looking at nearby airports for deals.
Or visit a couple of different spots to snag a good airfare. A traveler could drive drop down to Chicago and then fly round-trip cheap to Boston. Right now, Southwest is offering Chicago to Boston round-trip fares for under $200.
Parsons says travelers heading to Europe should at least look at departing from Rochester, instead of the Twin Cities. Depending on fare fluctuations, it's possible a much cheaper fare could be found.
