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Airfares are soaring, but not just because of oil

Sat., March 12, 2011

Airlines have raised fares by as much as $60 per ticket since the start of the year. (Associated Press)
Airlines have raised fares by as much as $60 per ticket since the start of the year. (Associated Press)

Airlines have used surging oil prices to justify fare increases of up to $60 per ticket since the start of the year. But the rising cost of fuel isn’t the only reason it’s getting more difficult to find cheap fares. The improving economy, a shrinking supply of seats and industry consolidation are also to blame.

“This is probably going to be the worst year we have seen in 10 years in terms of finding bargains,” said Tom Parsons of travel deal website

Even before turmoil in the Middle East drove oil prices higher, airfares were headed higher. The average cost of a round-trip ticket on a U.S. airline was $360 before taxes at the start of 2011, a 9 percent increase from the previous year. By summer that figure could reach $430, said Robert Herbst, an independent airline analyst.

Airlines have the upper hand on prices for several reasons:

The improving economy. Business travelers are expected to take 441 million trips this year, a 3 percent increase from 2010. As a result, airlines are reserving more seats for pricey last-minute bookings. That leaves fewer cheap fares for leisure travelers, who tend to book further in advance.

Fewer seats. During the recession, airlines reduced the number of routes and planes they fly. As travel demand picks up, this shrunken supply of seats allows the industry to charge more.

Consolidation. Six airlines have combined into just three over the past 14 months – Delta and Northwest, Continental and United, Midwest and Frontier – leaving bargain hunters with fewer choices.

American Airlines raised U.S. fares by $10 per round trip on Wednesday. If its competitors follow – as is customary – it would be the seventh broad price hike this year by U.S. airlines.

It isn’t just the base fare getting more expensive. Checking bags, reserving an aisle seat and other services are no longer universally free.

Some high-traffic business and leisure routes, such as New York to Los Angeles, will see large hikes, Parsons says. The cheapest fare between those cities last July was $382. This year, it’s $544.

International routes aren’t offering any relief, either. The cheapest available August flight from Miami to Paris cost $1,250 this week – 53 percent higher than last year, according to SmarterTravel.

Vacationers looking for the cheapest tickets should aim to fly on Tuesday and Wednesday, the least busy days for the industry, Parsons says.


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