Raleigh, N.C. — Airline ticket prices could rise about 50 percent over the next few years, one aviation expert says, and that could change the face of the friendly skies.
"That means we may go back to the 1960s and 1970s, where the typical traveler was a higher-income traveler, and we move away from the mass movement," said John D. Kasarda, director of the Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill's Kenan-Flagler Business School.
As with most aspects of transportation, gasoline prices are forcing transformation in the airline industry.
Kasarda says that a few years ago, fuel was 20 percent of an airline's cost. It's now up to 70 percent for some carriers.
To help cover the extra costs, most U.S. carriers are now charging fees for services they once offered at no extra cost. Most recently, for example, American Airlines began charging fees to check baggage. Other carriers, such as U.S. Airways and United Airlines are expected to follow suit.
Kasarda also believes that airlines will eventually charge fees for other luxuries and perks, like window seats, aisle seats, seats in exit rows and snacks.
"They're going to charge for everything they can," he said.
Coupled with rising fuel prices, Kasarda says, U.S. carriers have not invested in newer equipment, unlike their European counterparts.
"As a result, their fuel efficiencies are very, very low and their maintenance costs are much, much higher," he said.
Kasarda said that In the short-term, he expects more airline mergers to reduce the number of available seats.
Ultimately, he expects there to be no more than four legacy carriers available. Some will merge, he said, and others will go under.
"So this is an effort to get control, not only of costs, but to shrink the capacity so supply does not exceed demand. Therefore, prices can rise," the professor said.
High fuel prices cause airlines to make changes
- Reporter: Bruce Mildwurf
- Photographer: Chad Flowers
- Web Editor: Kelly Gardner
Copyright 2011 by Capitol Broadcasting Company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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June 25, 2008 5:19 p.m.
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That would be the absolutely wrong approach to take to fix the industry's ills. What needs to happen is a culling of the herd via market forces and that means eliminating the abuse of Chapter 11 by the airlines where companies can enter Chapter 11, jettison all of their contracts and obligations, and come out the other end with a cost structure that does not allow for fair competition in the marketplace.
AA was the only major carrier besides WN that didn't enter Chapter 11 after 9/11. All of their competitors got much stronger because they were able to jettison the expensive pension plans, essentially emasculate their unions, and come out with a cost structure much closer to WN's.
Should US or UA or NW survived after 9/11 if normal market forces were in play? Nope.
It's going to be a painful process but it's needed.
June 25, 2008 11:03 a.m.
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TSA has absolutely nothing to do with the state of the industry today. Granted, inconsistent application of regulations doesn't help the flying experience but to say they are the only reason the airlines are near bankruptcy proceedings again shows a complete ignorance of the industry's workings.
The real problem was the government bailout of the airlines after 9/11 and Chapter 11 of the bankruptcy code which allowed airlines that should have been liquidated to keep flying. That coupled with the insane oil speculating going on right now is putting the screws to airlines with inefficient route structures, aging aircraft that are gas guzzlers, and high-priced employees due to union contracts.
Our country has no need for the capacity for nine legacy domestic carriers and Southwest is now the only carrier with a business model that works.
June 25, 2008 10:50 a.m.
Remember This: When TSA Goes, We Will Come!
Wayne Gray
June 25, 2008 10:09 a.m.
WRAL - make this bozo name the carrier that's fuel cost are 70%. Nonsense - I think the figures are more like they were 10-12% noe they are 20-30%.
"...Coupled with rising fuel prices, Kasarda says, U.S. carriers have not invested in newer equipment, unlike their European counterparts.
"As a result, their fuel efficiencies are very, very low and their maintenance costs are much, much higher," he said. ..."
Again, nope - Fuel inefficiencies have some impact - but, US domestic service requires longer stage lengths than our counter parts on other countries. The longer the stage length, the less per mile you can charge. Think about we have to fly NYC-LAX, where does Air France have that domestic problem.
Also our airlines are reliant on RJ's - 50 seater's are hard to make a profit with with oil at $130 a barrel.
June 25, 2008 9:52 a.m.