Airfares Headed Back Up

Fees for luggage, legroom and other perks will creep up as well.

By Martha Lynn Craver, Associate Editor, The Kiplinger Letter

July 2, 2009

Bargain-basement airfares will inch up in the fall. Airlines are cutting back more on flights in hopes they can firm up prices when the economy starts to show some improvement in the final quarter of this year. “There are still good deals, but procrastination is a lot riskier than a month ago,” says Rick Seaney, CEO of FareCompare.

More capacity cuts will also mean more midsize communities will lose service, and larger markets will offer fewer flight choices for travelers. “As service is cut, the system is becoming less and less valuable to business travelers,” says Kevin Mitchell, chairman of the Business Travel Coalition, an advocacy group for business travelers. Planes will be fuller, and more layoffs are on tap for airline employees. On a bright note, capacity reductions also mean there should be less airport congestion and fewer delays.

Carriers need higher fares to stay aloft after being buffeted by the recession, swine flu and much more expensive fuel. Industry losses, which were projected in March to reach almost $5 billion, are now expected to climb to $9 billion this year.

Fare sales will continue, but will be hard to find. More than likely, they’ll be limited to certain routes and limited to the “off” days of travel -- Tuesday, Wednesday and Saturday. Bonus mile deals will continue to be generous; it’s a proven way to keep passengers loyal to one airline.

Add-on fees will also rise. Virtually unknown two years ago, these fees now make up an important source of revenue for the carriers. In 2009 alone, they will account for an extra $3 billion in sorely needed revenue. There’s even talk that one carrier is considering adding coin slots on the doors of its toilets.

Some sweet summer deals are still available. This is especially true on international routes where overcapacity is at its worst. “There are crazy good deals out there, like $500 fares to Europe,” says Seaney.

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