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Things have been going pretty well for the airlines, in case you haven’t noticed, and according to the airlines themselves, the good times should continue to roll. The Dallas Morning News‘ Terry Maxon reports airlines are “cautiously optimistic” about the near future.
The reason for caution, however, is simple: Fuel prices. The cost of jet fuel has risen slowly but steadily throughout the year, but more importantly, has risen dramatically after plummeting early in the recession. In fact, at nearly $100 per barrel, jet fuel is at its highest point since just before the Great Fuel Price Spike of 2008, which effectively sparked the onslaught of extra fees and charges we’re still dealing with today.
Still, airlines feel that if they are conservative in terms of capacity, profits will continue pouring in. “We are cautiously optimistic about the outlook,” US Airways Group Inc. president Scott Kirby told the Morning News. “We think the revenue environment will continue to be strong. There’s certainly no evidence that things are sliding backwards at all.”
One airline taking a less bullish tone is JetBlue. After predicting a very strong end to 2010, the airline has tempered its optimism a bit. “I wouldn’t say it’s any weakness,” JetBlue chief financial officer Ed Barnes told a conference. “If anything, maybe we were a little more optimistic, and things didn’t quite turn out as strong as we anticipated.” JetBlue is still expecting growth, just not as much.
Where does this leave the consumer? For starters, all this “optimism” refers largely to one thing: Rising fares. Capacity management, along with an increase of travelers has meant higher fares, more revenue, and profit. So for consumers, it seems air travel is going to be on the pricey side for the near future. It will take time, and a strengthening economy, to create a more competitive atmosphere where prices are cut and people can save. In the meantime, travelers will have to be diligent in their fare comparisons, and snag good deals the second they pop up. There will likely be fewer to go around.
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