According to an article by USA Today, travellers should expect to pay more for airline tickets and more in fees across the industry in 2013. Gasoline prices are predicted to remain lower, however.
According to USA Today, there are few certainties when it comes to travel. But in this new year, travelers can count on one thing: They'll have to spend more money if they want to fly. Airlines had a profitable 2012. And industry analysts say they'll probably have an even better 2013 if they keep raising fares, charging more fees and cutting back on the number of flights.
That may push some travelers to their cars. If it does, they won't see record high gasoline prices at the pump for the first time in two years. Consumers may celebrate other victories in the new year, as the Department of Transportation considers broader restrictions on some airline practices.
But expect hotels, rental car agencies and even cruises to adopt some airline strategies that will end up costing travelers more.
Here's a rundown on what travelers can expect to see in the new year, as proposed by USA Today.
Higher Airfares
Outside of some short seasonal sales, don't count on fares dipping in 2013. The price of an airline ticket has been creeping up for the last two years. Airlines raised fares seven times last year and nine times the year before, according to Rick Seaney of price-watching site FareCompare.com. This year should bring more of the same.
"I expect to see more than 2012's half-dozen domestic hikes, as the scale of pricing power continues to tip to the airlines," Seaney says.
Airlines have pared the number of available seats to match more accurately the number of travelers vying to fill them, while multiple mergers in the industry have reduced competition on some routes. Those factors, along with high, fluctuating fuel prices, have given airlines the leeway to charge customers more, Seaney and other analysts say.
"We've seen so many fare increases so far … but we haven't seen a resulting drop-off in demand," saysKevin Schorr, vice president of Campbell-Hill Aviation Group, an airport and airline consulting firm.
As a result, he says, airlines have room to continue to raise fares. "To the extent they can maximize revenue, they're going to do it," he says.
Is there a bright side to higher fares? Seaney says there could be. "We are likely to see some of those airline profits invested back into a woefully neglected product," he says, "with newer and updated aircraft."
More Fees
Paying for a trip will look less like a prix fixe menu and more a la carte this year. Airlines collected $924 million in baggage fees alone in the third quarter of last year. They made another $652 million from fees to change reservations.
Travelers no longer howl as much about them. Others in the travel industry have taken notice and are charging fees for services that used to be part of a ticket or room rate.
"Checked-bag fees have been a big success for airlines, and consumer pushback over the course of time has declined," says Jay Sorensen, president of IdeaWorks, a consulting firm that specializes in so-called ancillary revenue. "We are now in a period of acceptance."
Hotels, rental car agencies and even cruises are now charging for services that really don't cost much more to provide.
Some hotels have guests pay extra for room safes, luggage storage and restocking mini-bars.
"This is something they do anyway," says Bjorn Hanson, dean at the NYU-SCPS Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management. "There's no cost involved."
Rental car companies have become expert at charging for extras. The base price for a rental car might look attractive, but you can easily double that with a GPS locator and infant car seat.
"In the car rental world, I would expect to see lots of options being added for which you are charged a fee as opposed to a base fee," says Adam Weissenberg, vice chairman and leader of Deloitte's U.S. Travel, Hospitality and Leisure practice, which released an outlook predicting robust domestic growth for travel companies in 2013.
Cruise lines also are trying out fees. Carnival Cruise Lines rolled out a pilot program called "Faster to the Fun" for $49.95. It includes early embarkation and priority dinner seating. On many ships, you can pay $30 or $40 more a person to dine at a higher-end restaurant rather than the venue included in the fare.
Blaise Waguespack, an aviation marketing professor at Embry-Riddle Aeronautical University, wonders how many more fees airlines can find. "The big issue is, how many more fees can you create?" he says.
US Airways began offering one: a premium meal in economy class on international flights for $19.99. Southwest, which heavily markets its no-baggage-fee policy, says it's going to impose a "no-show" fee this year if you don't come and take a seat you've reserved.
More Airline Consolidation
Delta and Northwest. United and Continental. Southwest and AirTran. In the last four years, those airline pairs have joined forces in a flurry of megamergers that have swept the U.S. airline industry. Expect maybe one more this year.
"A merger of US Airways and American is inevitable," says airline analyst Bob Herbst of AirlineFinancials.com. "I expect a formal announcement of the merger during the first quarter of 2013."
American's parent company, AMR, filed for bankruptcy protection in Nov. 2011. Since then, it's entered into a non-disclosure agreement with US Airways to discuss a possible union, a shift that American's pilots, flight attendants and mechanics have said they'd like to see. British Airways has also expressed interest in having a stake in American.
American CEO Tom Horton has repeatedly said he wants the carrier to remain independent after it restructures, but that would make it an exception among the large network airlines. US Airways and America West joined in 2005, followed by Delta and Northwest in 2008, United and Continental in 2010. Low-cost carrier Southwest's purchase of AirTran was completed last year.
Other alliances also are forming. Delta announced at the end of the year it was buying a 49% stake inVirgin Atlantic, a partnership that will give it greater appeal to the premium-paying passengers traveling between New York and London's Heathrow Airport.
And it's not just big carriers that may decide to link up in 2013. "It's possible that some of the smaller low-cost carrier airlines could decide to merge in order to be larger, stronger competitors," says Henry Harteveldt, travel industry analyst with Hudson Crossing.
Some industry analysts say the winnowing of airlines gives those that remain more power to boost fares, and shrinks competition in some markets. But a recent report by professional services company PwC US concluded that the spate of mergers the last decade hasn't dampened competition. On average, it found, the top 1,000 routes were served by just under two carriers in 2004, and competition was roughly the same in 2011.
Gasoline Prices
Some relief at the pumps is in sight in 2013. After setting records each of the last two years, gasoline price hikes are predicted to subside a bit.
"I don't believe 2013 will feature as high of a yearly average as 2012," says Patrick DeHaan, senior petroleum analyst at GasBuddy.com, which monitors gas prices. "The good news for motorists is that booming domestic production is leading to high inventories of crude oil."
The average price for a gallon of gasoline nationally came in close to $3.63 a gallon last year. The U.S. Energy Information Administration projects prices should average $3.43 per gallon this year.
Brian Milne, energy editor for Schneider Electric, says demand for gasoline fell 3% last year because of the poor economy. The growth of energy-efficient cars also dampened demand, he says.
"The economy has been so terrible," Milne says. "When people are unsure of the economy, unsure of their status, afraid of losing their jobs, they cut back on discretionary spending and are more careful with their finances, and that tends to mean less gasoline demand, as well."
Expect the highest prices when refineries switch from winter to summer blends in March and April, and when Gulf Coast refineries brace for hurricane season in August and September, DeHaan says.
Passenger Protection
The Transportation Department has taken a more aggressive role in protecting air travelers the last four years, and it isn't letting up.
The department's latest proposal, which is expected early this year, could force airlines to provide common fees, such as those charged to check luggage and pick seats, to websites that compare airfares.
"With so many extra fees, consumers are getting a bit punch-drunk," says Charlie Leocha, director of the advocacy group Consumer Travel Alliance and who's on a department consumer advisory board.
It's a contentious debate, because airlines prefer to sell tickets on their own sites and pay to be included in comparison sites. Nicholas Calio, president of the industry group Airlines for America, opposes the proposal, saying the "reasoning is flawed."
It's not clear yet what will be in the rule. But the department in December said it was actively working on the rule "that could require, among other things, that optional fees be displayed at all points of sale."
Separately, the DOT's Advisory Committee for Aviation Consumer Protection will continue reviewing suggestions to make air travel easier. The panel's recommendations in October called for greater transparency in ticket pricing, simplifying contracts that accompany plane tickets and providing relief areas at airports for service animals.
Source: Travel Daily News
