2011 Airfares are Taking Off!

Something completely different has occurred in the airline industry’s hyper-competitive industry and with their ongoing pricing battles. All sides have agreed to an accord – 2011 airfares will be more costly to travelers.   According to the U.S. Department of Transportation domestic airfares increased by 13% in the second quarter of 2010 compared to last year. The three main reasons for this increase seems to be from rising oil prices, the expansion of low-cost airlines, and the growing demand for air travel. 

Rising Oil Prices

It’s no secret to anyone that oil prices rarely go down and the price at the pump has steadily escalated over the past decade. As a matter of fact, oil prices have gone from $20 a barrel to over $90 a barrel during that time period. The airline industry is negatively impacted by the rising prices and must find ways to afford the cost. Rising airfares is just one method. 

Low-cost Expansion

Making matters worse is the growing of low-cost airlines such as Southwest and Spirit. By expanding into major hubs like Chicago and New York these airlines subject themselves to rising operating costs because of flight delays, which influence turnaround times and schedules. This means these low-cost outlets may not be as low-cost in the future. 

Air Travel Escalation

The mounting demand for air travel has also kicked airfares up, but there’s another important aspect to this point. As the demand rose the airlines lowered capacity by condensing flight schedules and purging less profitable routes. As a result travel demand has exceeded passenger seat availability. The industry calls this the passenger load factor, and when it is high airfares follow. And it doesn’t seem like the airlines are going to expand schedules or routes, since the last time they did that it nearly collapsed the industry because of the failing economy.

As this confluence of factors stimulates cost growth, the airline industry, starting with American Airlines, is also trying to boost their leverage in pricing. American Airlines recently took their flight inventory off of the website Orbitz. The company wants Orbitz to get its flight information directly from American and cut out the middle man, namely the global distribution companies. American and other airlines pay fees to the global distribution companies and would like nothing more than to eliminate that fee.

Some experts believe that if other airlines follow, then key money-saving outlets, such as Orbitz, Expedia and Priceline could be jeopardized and air travelers would have to rely more on the airline websites for purchasing tickets.

With all of this action taking place in the airline industry it looks as if 2011 will be more costly to the consumer. It also seems as if comparison shopping for tickets could become challenging, especially if visiting each airline site for prices is the only option. But it hasn’t come to that yet, so keep comparison shopping and also try other options for travel, such as car, train or bus.  The airline industry is notorious for its shortcomings so try not to be frustrated by these price changes. It’s the same with almost everything else that you purchase; the prices keep going up and you have to challenge yourself to find ways to save money.