Facing costly fuel, airlines push fares higher

February 28, 2012 RSS Feed Print

At higher fuel costs, more routes become unprofitable and targets for the chopping block. That will make it harder for passengers to get where they want to go.

Delta Air Lines will end flights between Miami and London in April. Demand was inconsistent, but "fuel is by far the biggest culprit there," says spokesman Trebor Banstetter.

In announcing that AirTran Airways would stop flying to several cities later this year, Bob Jordan, the executive who runs Southwest Airlines' AirTran unit, says, "there are some markets that we simply cannot make work" at current fuel prices.

The airlines say that over the long term, airfares have increased far less than other consumer goods and services. And although most U.S. airlines made money the last two years, there have been many years since 2001 in which they lost money. The industry's current recovery is tenuous.

Net profit margins at U.S. airlines fell to 0.3 percent last year from 1.6 percent in 2010, according to Airlines for America. The group's chief economist, John Heimlich, says that in the last decade airlines increased revenue by packing more people on the plane, but there just aren't many empty seats left anymore. Airlines need to raise more money to cover fuel, labor costs, and other expenses — and that means higher fares.

The airlines' latest attempt to raise fares — by up to $10 per round trip — failed this week. But they won't stop trying.

"You win some; you lose some," Heimlich says of the attempted fare increases, "but there is no letup in the rising cost pressures. Fuel isn't the only one, but it's the biggest."

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