Spring break will soon be over, and it's time to think about summer vacation.
Consumers who were hoping to score a cheap trip to the beach or book an inexpensive flight to Europe will be disappointed. Airfares are going up, and with jet fuel prices on the rise, industry analysts expect summer deals to be few and far between.
"We're going to see much higher fares this year," said Brett Snyder, who writes the Cranky Flier blog. "As much as airlines can get away with."
A repeat of 2008?
Since the beginning of the year, airlines have raised fares up to $60 round trip in some cases in six different airfare increases. Fort Worth-based American Airlines recently attempted to push fares up by $10 more per round trip, but other carriers did not match it, causing American to pull back.
"This is exact behavior we saw in 2008, almost to the T," said FareCompare.com founder Rick Seaney. "Same price of oil, the same number of price attempts."
In 2008, crude oil -- the source of jet fuel -- peaked at a record $140 a barrel. Airlines scrambled to cut capacity, a move designed to put more passengers on each plane, while attempting to raise prices or add fuel surcharges to tickets.
It wasn't enough to overcome the effects of the financial crisis and the fall in demand. As a result, domestic carriers ended up losing billions of dollars that year when their operating costs rose and travelers decided to stay at home rather than pay the higher prices.
So far, oil hasn't reached the highs seen three years ago. The price of U.S. crude oil fluctuated around $100 a barrel last week, and analysts say the industry is better prepared than it was in 2008.
For example, during the recession, airlines cut their flight schedules by double digits, reducing capacity even more than demand fell. That has meant flights that take off with load factors -- the percentage of seats filled with passengers -- that top 80 percent, a level typically seen only during peak travel times in previous years.
Now, with the economic recovery, more people are traveling again and appear to be willing to pay higher prices.
"Demand is strong, and it's holding," Snyder said. "My assumption is bookings must be coming in pretty strong so airlines can push the fares up."
Europe fares surge
Planning the trip of a lifetime to Europe this year may take travelers a lifetime to pay off.
Typically, summer fares across the Atlantic average between $800 and $1,000 for a round-trip ticket.
But fares to Europe have jumped more than 30 percent in the past two months, Seaney said. Round-trip tickets to London, Paris and Rome all cost around $1,500. Included in the higher fares are about $400 in fuel surcharges and $120 in taxes, he said.
For travelers set on a European vacation, there are a few ways to try to save money, travel experts say.
First, they recommend not picking a destination until after you look at the fares. For example, there have been airfare sales to Ireland, offered by Irish carrier Aer Lingus, from various cities in the U.S., for around $800 round trip.
Second, travelers should consider taking the train.
Anne Banas, executive editor at SmarterTravel, said that if you are determined to go to Italy, it may be cheaper to fly into a German city like Frankfurt and then take the train to your destination. Low-cost carriers that specialize in routes within Europe, like Ryanair or Air Berlin, are also an option.
"If you're a traveler who has firm plans and wants to go to Madrid, you need to think about planning your vacation early," Banas said. "If you want to go to Europe and can be flexible, you can take advantage of deals or distressed inventory sales closer to your travel date."
When to buy
"Buy airline tickets on Tuesday afternoons" is usually the mantra from travel experts, since airlines typically put fares up for sale on Tuesday morning.
This year, that advice may not hold true.
"The sales are fewer and far between, and the number of seats available on those sale prices is smaller," said Seaney, adding that fare increases have occurred on all days of the week this year.
Instead, fare alerts that tell consumers when prices are changing on a certain route may be the best way for travelers to stretch their dollars. Consumers should start shopping in the next couple of weeks if they want to travel in June and July, he said.
But for those who want to travel in late summer, fall or the holidays, waiting may be the best option. In 2008, many consumers bought tickets early in the year, fearing that oil prices would continue to skyrocket. Instead, oil prices and airfares dropped significantly in the early fall, benefiting procrastinators.
Consumers need to at least get an idea of what the airfare currently is for the route they want this summer, Banas said. She recommends that consumers get a benchmark now and then watch the prices.
"When you see a good deal that is in your budget, buy it and then don't look back," Banas said.
The days of relatively inexpensive, carefree air travel are quickly becoming a distant memory. As the price of fuel increases, so too has the price of airline tickets. While it seems logical that airlines would want to raise their prices in order maintain a profit margin and stymie rapidly approaching losses,.
the decision to do so could actually be detrimental to customers—personal and business—and airlines both. You don’t need an online finance degree to see that in today’s highly competitive airline industry, airlines must balance their expenditures and prices very carefully if they want to remain able to attract customers and fill their planes.
by Thomas Puddephatt
Complicating the decision making process by upper management, the rapidly rising cost of fuel shows no end in sight. According to the International Air Transport Association (IATA), a leading trade association for the airlines, fuel costs are expected to increase by $45 billion over their 2010 levels. During the second week of March 2011, prices rose 5.1 percent from the previous week alone and a 13.7 percent increase over the previous month and 53 percent over last year; more evidence that fuel prices are only going up.
Unfortunately it has already been very difficult for airlines to break even on many routes due to the rising cost of maintenance, staff and fuel. This only serves to exacerbate the problems caused by rising oil and gasoline prices and having an expected negative affect on airline capacity figures and ultimately, the profitability of the airlines.
