A Public Service Announcement About Rising Airfares

Late last week, a friend of mine asked me why airfares were so expensive. Of course, I asked her where she was trying to go. She said she wanted to head up to San Francisco at the last minute, and the fare was a horribly high $200. $200?!?! I’d say that’s more than fair for a last minute trip up north.

For some reason, people hold on to the notion that air travel should always be insanely cheap. It should be $200 roundtrip to fly coast to 08_03_16 themoreyouknowcoast every time. How absurd that they would have the audacity to raise fares?! Here is my public service announcement. (Cue “The More You Know” Theme Music, old image copyright of NBC)

Fares HAVE to go up. Stop complaining and pay up.

I know, I could have at least added some cherry flavor to that medicine, but I find it has more impact this way. Oil is now above $110 a barrel. For most airlines, this is the number one cost, above labor.

And for all those airline employees who have suffered through wage cuts, that is barely making a dent in the overall cost structure. I’ll let Jamie Baker of JPMorgan (via PlaneBuzz) explain it for you.

It’s Just Math. Industry fuel likely to be some $25 billion higher than 2002, overwhelming the $7 billion in labor savings wrought by the Ch.11 cycle.

Fares have to continue to rise. More than one airline CEO has said that with the prospect of high fuel prices continuing, they’re going to be looking at big changes. That probably means fewer flights because they just can’t make money at these cost levels.

So, next time your ticket is priced higher than you expected, don’t complain. Just realize that it’s the way it has to be.


13 Responses to A Public Service Announcement About Rising Airfares

  1. Jeff K says:

    I don’t have a problem with fuel-related cost increases…it’s the “auction” mentality used as the flight begins to fill up. I guess those last 10 seats must be made of gold because they typically cost 3X more…but when i sit in them it’s the same crappy experience.

    I know that the fares are cheaper further out from the date of the flight as a carrot to lure you in and solidify cash flow. But my issue is that when I book 2 months out, because I need to make sure there is a seat available and not so much to save money, and then get GOUGED with change fees and fare differences because I had to change the dates 3-4 days before the flight because of work I have to cry B_llsh_t. Sure, I might be off here because I’d guess if they didn’t structure things this way someone would scam the system and I guess I could purchase a “changeable” ticket initially for 2X-3X of the cheaper fare.

    With all that I gotta hand it to Southwest as their pricing to me is the most consistent and has a ceiling no matter what.

  2. CF says:

    Jeff K – Pricing isn’t really designed exactly as you think, but it certainly comes off that way.

    Back in, oh, say, the 50s, if you wanted to fly, you were paying full fare. Those thousand dollar fares you see today? That’s what everyone was paying back then, adjusted for inflation of course. The planes were half full at best

    As we got toward deregulation and then beyond it, airlines began experimenting with lower fares to find a way to fill those empty seats. Of course, if they lowered fares all around, it could be a money-losing proposition, so they created “fences” to prevent people currently paying full fare from buying the lower ones.

    That’s where the Saturday night stay, advance purchase, and non-refundable requirements came from . Since most travelers were going on business, they needed flexibility. By putting these new rules on the low fares, existing travelers would keep paying the same price, but other travelers who couldn’t afford the higher fares would pay the low price and fill those empty seats. Great deal for everyone.

    Of course, as competition increased, many of these fences started to disappear. Every airline, including Southwest, still uses fences to varying degress. Air Canada has done the best job by creating a tangible value that lets you see why you’re paying more.

    So, if you want a refundable ticket or you want the ability to change for free, you need to buy a higher fare. Where I think we run into problems is that the values are all messed up. So, a refundable fare may be 10 times the price of a nonrefundable one, and that’s rarely going to be worth the price for anyone.

    In other words, the idea works for me, bu the actual values don’t.

  3. RuralRob says:

    It’s not so much that prices are going UP, as it is that the value of the U.S. dollar is going DOWN. Everything is becoming more expensive, and will continue to do so until our corrupt so-called “democracy” gets its collective head out of its ass and starts living within its means, and paying off the national debt.

  4. Yo says:

    “our corrupt so-called “democracy””

    geez

    Go live somewhere else, where hyperbole is appreciated.

    (BTW, we live in a Republic, do some research)

  5. Cathy says:

    As long as the war continues at its current cost of $5,000 PER SECOND fuel will continue to rise and airfares rise astronomically. The “waste” our president rails about has the most examples in the contractors over there, their bosses here, and their tax shelters in the Caribbean. (You got a spare $5G’s? It just went to win someone’s heart and mind, or more likely kill the breadwinner of their family.)

    Sorry for the off-topic rant. This just needed to be said.

  6. Mike says:

    LOL. Nice how somebody had to make a thread about rising airfare…about the War on Terror. Keep enjoying that safety you take for granted, Cathy. Cuz if you get your way…it’s gonna be going away pretty quickly.

  7. Mike says:

    I direct you to this editorial in Investor’s Business Daily for a pretty nice summary of why oil is at $106 a barrel. http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=288402975623501
    Four words:
    Arctic National Wildlife Reserve

  8. Jason H says:

    I think the crux of CF’s arguement is that many of the population of the US expects everything for nothing. I am in complete agreement with the shock (outrage?) expressed at someone complaining about $200 last minute airfares. I paid $2500 for a last minute coach flight from Denver to Montreal and I accept that as a price for waiting to book a ticket. As the cost for refueling my rental cars goes up I accept that the cost of flying several thousand miles must go up as well. I don’t understand people that believe there should be a disconnect between the cost of airfare and market dynamics. If it’s too expensive to fly, please just stay home.

  9. Travis says:

    Oh, the ANWR card again.

    Even if they started drilling tomorrow, it would take seven to ten years to begin producing oil from wells on ANWR. That’s going to do exactly zero to change oil prices in the short term.

  10. Heather says:

    As a flight attendant, I listen to people bitch all day long. About EVERYTHING. Much of it is justified, but I get really aggravated when people complain about what little service they receive for the price they pay. “Why don’t you have meals?” they ask. “Because you’re only paying $49, that doesn’t even cover the cost of fuel!” What’s the only thing that hasn’t changed about air travel in the last 25 years? The price tag. If you want to pay 1980’s fares, something’s gotta give. No sandwich for you! Besides, they’d just complain about how horrible airline food is anyway :)

  11. kahreen says:

    I get it- fuel prices go up, the price of airfare (and everything else) goes up. But what the hell is going on when I can’t get a direct flight between JFK and London, 3 months in advance, for less than $900?? That’s not an incremental increase. My friend flew from Oslo to JFK for New Years Eve for $400- now the same ticket (I want to go visit her in Oslo in July) costs $1200. I don’t expect airfare to be dirt cheap- but I do expect it to be reasonably affordable, and right now it’s not.

  12. CF says:

    kahreen – It’s all about supply and demand. There is very little demand in economy class to Europe for most of the year outside of summer, so you can always get lower fares. Once summer comes around, everyone wants to fly to Europe and fares will be much higher. This happens every year.

  13. Dave says:

    The reason why the economy always suck is from thinking like this. We’re taught to believe gas at 3 bucks a gallon isn’t bad, because hey look at Europe. We’re taught to believe that it’s OK I got a 2% raise this year while electricity went up 21%, because at least I have a job, I should be thankful :-X Thinking like this will create jobs, because they won’t have to outsource to China and India cus the poor slobs in this country will be getting paid dirt. There is no more middle class, don’t let them fool you. If you don’t make over 100 thousand dollars a year you’re poor like the rest of us. Babe Ruth, in his prime made a little more than the President. They asked him and he said well the President can’t his as many home runs. How much more will Micheal Phelps make than the salary of the President? There are two America’s and they sure as hell ain’t created equal! The haves and the have nots never were!

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