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Holiday travelers should expect higher airfares and packed planes

Because airlines have reduced thousands of available seats, low-fare airline tickets for the busiest days surrounding Thanksgiving and Christmas will go quickly, experts say, leaving only high-priced seats or fares for flights several days before or after the holidays.

November 08, 2011|By Hugo Martín, Los Angeles Times
  • An estimated 23.2 million Americans are expected to fly during the 12-day period before and after Thanksgiving, a 2% decline from last year, according to the Air Transport Assn. Airline officials attribute the drop to the weak economy and worries among travelers over stubbornly high unemployment rates. Above, lines at Los Angeles International Airport for the Fourth Of July weekend.
An estimated 23.2 million Americans are expected to fly during the 12-day… (Mark Boster, Los Angeles…)

Travelers planning to fly for the Thanksgiving holiday face two helpings of bad news: Ticket prices are expected to be 6% to 12% higher than last year, and empty seats will be even harder to find.

Because airlines have cut thousands of available seats for the holiday, low-fare airline tickets for the busiest days will go quickly, leaving only high-priced seats or fares for flights several days before or after the holiday.

"With the reduced capacity, planes are going to be more full," said Joe Megibow, vice president and general manager of travel website Expedia.com. "People are going to find that even the middle seats are going to be filled."

An estimated 23.2 million Americans are expected to fly during the 12-day period before and after Thanksgiving, a 2% decline from last year, according to the Air Transport Assn. Airline officials attribute the drop to the weak economy and worries among travelers over stubbornly high unemployment rates.

"Passengers still should expect full flights during the Thanksgiving holiday travel season as airlines have begun to reduce capacity and limit the number of seats available for sale due in part to rising cost pressures," said John Heimlich, chief economist for the trade group.

The higher fares and cuts in airline capacity mean people traveling for Thanksgiving, as well as for Christmas, will be forced to depart much earlier and return much later after the holidays if they want bargain fares.

Some travelers are already having a tough time finding cheap fares. Hillary Werhane of La Cañada Flintridge said she recently shopped all the major airlines and still paid about 10% to 15% more than she paid in the past for airline tickets to visit her mother in Chicago for Christmas.

"And I couldn't find any window or aisle seats," she said as she waited for a flight to Boston from Bob Hope Airport in Burbank. "It definitely felt harder to find a seat."

Airlines have cut capacity as they struggle with their own financial woes. For example, airline officials say, jet fuel prices have jumped nearly 40% over last year, labor costs continue to rise, and there is concern about an Obama administration proposal to increase taxes on airlines.

In the first nine months of the year, airline revenue rose 12.7% over the same period last year, Heimlich said. But expenses during the same time jumped 16.1%, leaving a profit margin of 0.9%, he said. In contrast, the industry enjoyed a 3% profit margin in the same period last year.

"The industry's razor-thin profit margin means that airlines are keeping less than one penny in profit for every $1 in revenue," he said.

Airlines have also taken a hit on Wall Street. An index of 15 major airline stocks as of Tuesday had fallen nearly 25% this year, compared with a 1.4% increase for the Standard & Poor's 500 index.

Shares of Southwest Airlines had dropped 35% this year, and United Air Lines' stock had fallen 23%. Hardest hit has been AMR Corp., the parent of American Airlines. Its shares closed Tuesday at $2.34 — down 70% since Jan. 1.

To boost profit and offset higher costs, airlines have gradually increased fares over the past year.

Six of the nation's largest airlines — including American, Delta, United and Southwest — have raised fares nine times this year, each ranging between $4 to $50 a ticket, depending on the distance.

Continental, American, Delta and United are also imposing surcharges of $20 to $40 for the busiest travel days — Nov. 27 and 28, Dec. 22, 23 and 26 and Jan. 2.

"The airlines are very intent at making money and they have every right as a business to do that," said Henry Harteveldt, a San Francisco-based travel analyst with Atmosphere Research Group.

Travelocity estimates that the average domestic airfare for the Thanksgiving holiday is $375, up 6% over last year. Expedia estimates that holiday airfares are up 12% over last year.

"They have higher costs, so they know they have to pass them on to passengers," said Jan Brueckner, a UC Irvine professor of economics who specializes in the airline industry.

Reduced competition has also played a role in rising airfares. United and Continental announced plans last year to merge to become the country's biggest air carrier. Southwest also announced plans last year to acquire AirTran Airways.

Although the merging airlines can't operate as one until they receive new operating permits from the Federal Aviation Administration, industry experts say the merger partners are not competing with each other, making it easier to raise fares.

"Consolidation allows them to have pricing power that they never had before," said Robert Herbst, a consultant and analyst who founded AirlineFinancials.com.

The nation's economic downturn, mergers and fuel prices have forced the nation's airlines to cut capacity 11% over the past four years, either by cutting routes or flying smaller planes, according to the airline trade group.

As a result, planes are flying closer to capacity than ever. In July, the most recent month for which federal figures are available, the average domestic plane flew with a record 87% of seats filled, according to the U.S. Bureau of Transportation Statistics.

"Most airlines have been chopping seats like crazy, the better to fly full and more profitable planes," said Rick Seaney, founder of the travel website FareCompare.com.

For the Thanksgiving holiday, the nation's airlines have continued to shrink capacity, cutting more than 600,000 seats on domestic flights from Nov. 19 to 28 compared with the same period in 2010, according to an analysis by FareCompare.com. For the Sunday after Thanksgiving — one of the busiest travel days of the year — the airlines cut at least 35,000 seats.

"My guess," Herbst said, "is you won't find any empty seats during the peak holiday season."

hugo.martin@latimes.com

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