Nov 02 2007
Fare Hikes Can’t Stop Airline Bleed
I fly a lot and take particular interest in how well the airlines are doing. An increase in miles traveled by paying customers usually means that there’s a lot of demand for flight. Combine that with an increase of supplying those flights–thanks to increasing fuel costs–and you get a formula for fare hikes.
AirTran’s traffic, as measured in “revenue passenger miles” a metric of how many miles the airline flies per paying passenger, increased by more than a third in October, various sources report. American Eagle, on the other hand, reports a decrease in traffic. Continental Airlines saw a 6% rise in revenue passenger miles for October. American saw a 3.5% increase.
The airlines are getting slammed, despite the increase in traffic, thanks to rising fuel prices. The price of fuel is up 44% this year, according to reports.
The net effect? Shares get slammed and ticket prices go up. This from Dow Jones:
American Airlines on Wednesday evening announced a significant increase of $20 per round-trip ticket on domestic flights, and some other airlines followed suit Thursday. Delta Air Lines Inc. (DAL) Thursday morning matched the increase on business fares. Alaska Airlines , part of Alaska Air Group Inc. (ALK), also raised some fares.
Southwest has been one of the few airlines to do well in the last decade. The reason? Effective hedging of fuel price increases. Still, when the rest of the industry is upping prices, you can up your prices too and still compete.
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[…] of the tickets it sells, Reuters reports. The move is designed to off-set increasing fuel costs. We’ve written before about the airline fare hikes and said they were like putting a band-aid on a machete wound. Now is a good time to lock in those […]
[…] The cause for the price fixing? Good old fashioned greed mixed with the increased cost of fuel. The price of fuel is up 44% this year, according to reports. Read our story about it from earlier this month. […]