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Airlines raise fares again, point to higher fuel costs

February 26, 2012|By Hugo Martin
  • Bag fees helped airlines generate more revenue in 2011.
Bag fees helped airlines generate more revenue in 2011. (Los Angeles Times )

For the third time this year, several of the nation’s major airlines hiked air fares last week, with United and Continental airlines initiating a $4 to $10 increase in round-trip ticket prices.

Virgin America, Delta Air Lines, US Airways and American Airlines have matched the increase, but JetBlue Airways and the nation’s largest domestic passenger carrier, Southwest Airlines, have yet to follow.

A fourth increase, initiated in January by Delta, was rescinded when several major airlines refused to match the increase.

Industry executives say the increases aren't surprising considering the rising cost of running an airline. They point to several statistics outlined in an economic report released this month by Airlines for America, the trade group for the nation’s largest airlines.

For example, the report said the nation’s airlines have cut fuel consumption, thanks to use of more fuel-efficient jets. But fuel prices jumped more than 40% between 2005 and 2011, negating most of the savings. As a result, the nation’s airlines spent $50.5 billion in fuel in 2011, up from $33.2 billion  in 2005.

So how did the nation’s airlines end 2011 with a slim 0.3% profit margin?

Industry experts say most airlines stayed in the black by cutting costs, including reducing staff and consolidating facilities. Airlines also tried to get as much revenue as possible out of each flight. They did this by filling an average of 82% of available seats in 2011, up from 72% in 2000.

In addition, airlines generated more money from bag-check fees and charges for food, entertainment and other onboard extras. The industry pocketed an average of $22 in fees per passenger per round trip in 2010, up from $3 per passenger in 2000, according to the report.

John Heimlich, chief economist for the trade group, said the report "is trying to tell a story about what is going on in the industry."

ALSO:

American Airlines vows to bounce back from bankruptcy

Airlines' revenue from fees has almost doubled since 2008, study finds

Airlines set record low rates for lost baggage, bumped passengers

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