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Originally published Thursday, July 3, 2014 at 10:09 AM

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Higher airfares could stick beyond summer

Fares up 4.5 percent from last summer as U.S. airlines keep capacity tight on domestic flights.


Bloomberg News

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Air travelers are paying more to fly in the U.S. this summer on crowded planes as carriers including American Airlines keep capacity tight, conditions passengers will have to get used to beyond the vacation period.

U.S. airlines are offering fewer flights, have dropped routes to certain cities and in some cases are flying smaller planes on domestic routes amid strong demand, helping to boost summer fares 4.5 percent from a year ago.

An average domestic round trip fare has climbed to about $399.48, based on data from Travelocity.com. An international ticket is about 2.3 percent more than a year ago, at $991.82.

This is the busiest season for U.S. carriers, with passenger traffic at its heaviest in July, followed by August, then June, according to data compiled by Bloomberg. Airlines for America, an industry trade group, forecast that travel on U.S. carriers this summer will be the highest in six years. But don’t expect seats to open up or fares to fall much once summer ends.

“Unless and until we see meaningful expansion among existing airlines or new competitors successfully launch service, we will continue to see airfares increase and flights remain crowded,” said Henry Harteveldt, a travel industry analyst and founder of Atmosphere Research Group in San Francisco.

About 210 million passengers, or 2.28 million a day, will travel on U.S. airlines from June 1 to Aug. 31, Airlines for America said. That’s up 1.5 percent from 2013. More Americans will also hit the road over the five days around the 4th of July holiday — 34.8 million, according to AAA, the biggest U.S. motoring organization, up 2 percent from last year.

“For people who want to travel long distances reasonably quickly, air travel is really the only viable option,” in the U.S., which lacks an extensive high-speed rail network, Harteveldt said.

An increase in summer travel reflects the economic recovery boosting consumer confidence and spending. Airlines too have rebounded from recession-era belt-tightening among travelers, posting record operating revenue last year, aided by almost $6.2 billion in baggage and reservation charges.

“This summer ticket season has been so strong there have been few fare sales,” said Savanthi Syth, a Raymond James Financial Inc. analyst. “Demand has been strong and they are able to fill the airplane at higher price points.”

Overseas flights

Current strength in the U.S. market offset lower-than- anticipated results from routes across the oceans last month, Delta Air Lines said Wednesday. Increased competition for overseas flights has led to overcapacity, thereby reducing the average fare per mile, Delta said.

After several mergers in recent years, including American Airlines with US Airways, and Delta with Northwest, there are fewer airlines operating today and they’re also pulling out of smaller hubs, further reducing options or forcing passengers to take multiple flights to a destination.

“The airlines have finally figured out that the way for them to reach profitability is to make it more trouble to travel and raise fares,” said Greg Raiff, chief executive officer of Private Jet Services, a corporate jet services firm. “Paying more is the new norm.”



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