U.S. Air Travel Set to Double, Airfares to Follow
It took U.S. airlines all of eleven days to increase ticket prices in 2012, with Delta announcing on the second Wednesday of the year that it was hiking some round-trip fares $20. United,, American Airlines, and US Airways promptly followed and then Southwest increased their one-way fares by $10. Dryly opined the USA Today's Travel section in response: "Fare increases often don't last because carriers don't want to price themselves too high...a low-cost carrier matching is a good indicator that [the hike] will stick."
Airlines had spent the 2011 holiday season and the very end of the year trying and failing to make airfare increases stick (and before you think that increasing holiday airfares is just how the airline industry works, no it isn't). So it was kind of a big deal when Delta managed to get the industry to follow along last January. Unfortunately the airlines seem to have figured out this "rate hike" trick, since the FAA just announced that air fares are likely to stay high "throughout this decade." Terrific.
Even worse for passengers, the increased prices aren't just a result of airlines playing ticket price chicken with each other. The FAA expects domestic air travel to literally double over the next two decades. Keeping up with that demand would take a JetBlue-sized carrier entering the industry every 10 months, which is impossible even under the best of circumstances. A global economy teetering on the brink of collapse while oil prices continue to climb is not, incidentally, "the best of circumstances".
Even worse, airlines have gotten very good at having just enough seats to go around ("capacity discipline" in industry-speak). That means that the coming years will see a lot more demand without much more supply. The math on what that does to prices only goes in one direction.
[Photo: lunchtimemama / Flickr]