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Airlines poised to take off

Lower costs, upgrades bode well for 2015 operations

Gregory Karp Chicago Tribune

CHICAGO – The airline industry is likely to be healthy again in 2015 because of mergers and falling jet fuel prices, and while consumers might be stuffed into slimmer seats in coach, at least they will be able to enjoy new and upgraded planes and more onboard amenities, such as Wi-Fi and streaming video.

“2015 is poised to be one of the best, if not the best, years for the U.S. airline business,” said Henry Harteveldt, a travel industry analyst with Atmosphere Research Group.

“It’s not an entirely positive picture, of course,” Harteveldt said. “Uncertain economic climates in parts of Europe and Asia could affect U.S. airlines’ international profitability. But overall, 2015 should be a year that makes airline CFOs happy.”

Here’s what to expect in 2015 for fliers and for the airline industry:

Fares: Globally, airfares are expected to fall 5.1 percent, according to the International Air Transport Association, although many experts don’t predict that kind of price drop in the U.S. Travel-booking website Expedia projects mostly mild decreases in ticket prices in North America during 2015, with some increases.

Why aren’t fares falling faster in the U.S. given airline profitability and fuel prices that have plummeted in recent months to the lowest levels in more than four years?

U.S. Sen. Charles E. Schumer, D-N.Y., has called for a federal investigation into what he describes as “extremely high” fares, citing a 10 percent increase during the past five years. He suggests that airline mergers and reduced competition might be inflating fares.

But Airlines for America, the U.S. airline industry group, is fond of noting that fares have been growing far slower than inflation for more than a decade. Besides, the group says, since when is making a profit from lower costs a bad thing?

Onboard amenities: Airlines are putting some profits back into their businesses. John Heimlich, chief economist for Airlines for America, said airlines are upgrading their airplanes and the airports they use at the highest spending rate in 13 years.

Onboard wireless Internet access is not new, but it also will become nearly ubiquitous in 2015, even on regional jets that fly passengers to network hubs.

Delta was an early adopter of Wi-Fi for all planes, but others are catching up. American said this month that it will equip 250 of its regional jets with onboard wireless Internet access. United announced weeks earlier that it would put Wi-Fi on more than 200 of its larger United Express regional jets by next summer.

United, American and Southwest Airlines will be big providers of streaming video in 2015. Providing streaming video is a move away from video entertainment on seat-back screens, instead allowing passengers to stream movies and TV shows, often free, to their iPads and laptops.

Airlines also are adding power outlets to seats, even in coach, to keep those devices charged.

The entertainment upgrades could help distract economy-class fliers from their cramped quarters. Leg and elbow space in airplane seats is shrinking as airlines try to make more money by cramming more seats in the back while selling upgrades for extra legroom.

Airlines are trying to mitigate the pain of economy class by installing slimmer seats, which fliers have reported can be uncomfortable. But even that will change for the better in 2015, Gwosdof said. “We’re seeing certain slim-line seats having the same level of comfort as the traditional ones did,” he said. “It’s not now universally a bad thing.”

Overall in 2015, look for better availability – for a cost, of course – of the “business-traveler trifecta.” That’s a flight offering Wi-Fi, in-seat power and seat pitch (essentially legroom) of 32 inches or more. “When you put them all together, it really creates a climate where a business traveler can get things done on the plane,” Gwosdof said.

Airline shuffling: American Airlines is likely to undergo the most change in 2015 as it integrates with US Airways.

The carrier announced this month that it would spend more than $2 billion on customer-related improvements.

Behind the scenes, American will seek FAA approval of a single operating certificate, allowing American and US Airways to operate as a single entity, although ongoing labor-contract negotiations will affect its ability to realize full benefits of the move.

Just as important, American will combine its reservations systems, the backbone of an airline.

Delta Air Lines said as of March 1 it will have five classes of seats, including a bare-bones selection to compete with low-cost carriers.

Frequent fliers: In 2015, United and Delta will add spending requirements for elite status – gold and platinum members who get free seat upgrades, free checked bags and early boarding, among other benefits. Delta’s shift takes place Thursday; United’s on March 1.

The changes are meant to reward big-spending corporate travelers, an airline’s most profitable customers. American resisted a similar move next year as it combines frequent-flier programs with US Airways. However, American said this month it will award bonus frequent-flier miles to customers who buy the pricey seats in the first-class and business-class cabins, beginning Thursday.

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