Flying Is Going to Get Even Less Fun
Saturday, June 14, 2008
For the past decade, airlines have lavished U.S. air travelers with more and more flights to far-flung domestic destinations at rock-bottom prices. But the rising cost of fuel, which has already roiled the nation's driving experience, is threatening to fundamentally alter the way Americans fly.
It's not just the loss of free peanuts, pretzels and sodas that's at stake. Analysts say travelers should brace themselves for a new world of airline travel brought about as the industry tries to keep pace with escalating oil prices. They say travelers should expect fewer flights, for planes to get more crowded and for airlines to steadily jack up ticket prices.
Over the past several weeks, airlines have unleashed a series of what analysts call "stealth" price increases. American Airlines, starting tomorrow, will begin charging travelers $15 to check their first piece of luggage. (The airline slapped a $25 charge on the second piece of luggage in May.) United and US Airways said they both plan to copy the policy. Airlines are charging fees for so-called premium seats on the aisle, by the window or in the emergency row. US Airways has even snatched away free pretzels and this week announced a $2 charge for in-flight sodas starting this summer.
"The party is coming to an end," said Richard Aboulafia, a Fairfax-based aviation analyst at Teal Group. "With fuel prices like this, it's going to get much worse for flyers. It has to get much worse, or airlines are going to continue to lose billions of dollars."
Collectively, the airline industry will spend more than $40 billion on jet fuel this year, according to the Air Transport Association, an industry trade group. Next year, they expect to pay $61.2 billion on jet fuel, four times what airlines paid five years ago. According to J.P. Morgan Chase, high fuel prices could result in total losses to the industry of $7.2 billion this year and $8.1 billion in 2009.
The industry's cutbacks and resulting changes are already starting to alter people's travel habits. Mary H. Robert, flying Delta Air Lines to Atlanta from Reagan National Airport, said she has become a light packer to avoid checking bags.
Robert, a human resources executive at a broadcasting company, planned meetings in Washington with two clients, squeezing appointments into what in the past would have been two business trips. She also brought her teenage son along to tour Howard University.
"We're combining as much as possible," Robert said. "People have started to cut back. They are not finding the great discounts on airlines anymore."
Many carriers have their summer schedules set. But in the fall, airlines will eliminate hundreds of flights. Analysts say the upcoming capacity cutbacks mean airlines will provide fewer choices outside the largest cities and fewer flight frequencies and nonstops. On Thursday, Continental Airlines said it would discontinue or reduce flights to dozens of cities, including flights between Dulles International Airport and the airline's hub in Houston. The airline said in September that it would close stations in nine U.S. cities, including Green Bay, Wis.; Palm Springs, Calif.; and Reno, Nev. Airline experts say service to these smaller cities costs airlines the most because too many seats go empty.
As airlines focus on flights on profitable big-city routes, analysts say they expect a sharp increase in air traffic to larger airports, exacerbating congestion in places such as New York.
Leisure travelers will feel the pinch first, airline analysts say. Airlines are pulling out of Florida cities and Las Vegas, where customers tend to get discounted tickets that leave little room for company profits. Terry Trippler, owner of Minneapolis-based TripplerTravel.com, expects business travelers to feel the changes, too.
He said airlines might remove the last bank of flights at a hub or consolidate flights to fill planes. That will mean less opportunity to jump on flights as a standby passenger. It also means that any schedule disruption, such as a major summer thunderstorm, could wreak more havoc at airports because the carriers won't have seat capacity to rebook passengers.
At American Airlines, executives said the carrier was looking for ways to burn as little jet fuel as possible. More and more, the airline is using trucks to tow jets to gates and generators to run air conditioners when planes aren't flying. The jet fuel bill at American is expected to top $9 billion, up $2.6 billion over last year. Oil prices continue to climb. Over the past week, oil has hovered near $135 a barrel, double the price a year ago.
Mark DuPont, vice president of airport services at American Airlines, said that the new luggage fees will bring in "several hundred million" annually but that they still won't be enough to offset jet fuel costs. "There is no silver bullet, nor is this the silver bullet," he said. "The airline industry is not built on $125-plus-barrel" oil, DuPont said.