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As Airline Profits Soar, Are Fare Sales Doomed?

The Associated Press (AP) has a new story that looks ahead at what travelers can expect from the airline industry in what's left of 2010. I'm going to spoil it for you: From a consumer perspective, it ain't good.

"Good times are finally back for the nation's airlines" write David Koenig and Joshua Freed. "For travelers, that means it's getting harder to find bargains."

It seems that not too long ago we were looking at a perfect storm of negative factors for the airlines, not the least of which was a massive recession, along with high fuel prices and too much capacity. Fees erupted and spread through the industry, and several airlines inched perilously close to bankruptcy. Some even went over the cliff.

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Now we're witnessing the opposite, a confluence of trends propelling the industry to profit and stability. Travelers are returning to the skies, only to find abundant fees, fewer seats, and steadily increasing fares.

"There were plenty of fare sales when the airlines were struggling to fill seats. Now those seats are in demand, so deals are less common," write Koenig and Freed. "And travelers are paying for 'extras' such as an aisle seat, checking bags and buying a ticket over the phone—things that used to be part of the fare."

As for fees, there's really no incentive for airlines to remove them. Customers can vote with their wallets, to a degree, by choosing airlines that charge fewer fees. But the industry is dominated by airlines that do charge fees, and most consumers have grudgingly accepted those ancillary charges as part of the business. For the airlines, fees mean millions, if not billions, in revenue.

And fee innovation is hardly over. Koenig and Freed note that, "Everyone is watching to see if travelers pay Spirit Airlines' fee of $45 for some carry-on bags" when that policy goes into effect August 1. Several airlines have pledged to not adopt the fee, but not all of them.

So what's a consumer to do?

"Travel demand will taper off as fall approaches," say Koenig and Freed, who point out that "[Continental's] advance bookings for the next six weeks are running behind the last year's pace." But this doesn't mean fares will fall across the board.

Airlines are in no rush to add capacity back into the system, preferring to stick with the more profitable and sustainable capacity levels currently in operation. This means fare sales, when they come, could be brief. Airlines will need to unload just a few cheap seats here and there to keep the supply/demand balance tipped in their favor. Consumers, then, will need to be vigilant in comparing fares and quick to snag a deal when it appears.

Readers, have you noticed prices creeping upward as you plan your travels this year?

Read comments or add your own insight!
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