Airlines make more money by offering fewer seats

Jim Burress Jan 21, 2013
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Airlines make more money by offering fewer seats

Jim Burress Jan 21, 2013
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Tuesday morning, Delta Airlines kicks off a whirlwind week of earnings reports at the nation’s airlines. We’ll also hear from United, US Airways, Southwest and Alaska in the next few days, with JetBlue reporting next week.

While it’s been a turbulent few years for U.S. carriers, they’re all expected to announce a profitable 2012. That’s largely due to years of mergers and consolidation, says airline analyst Vaughn Cordle of Ionosphere Capital.

“For the network airlines, they’ve collectively shrunk their capacity in the U.S. domestic market by over 50 percent since 2000,” Cordle says. In other words, they’re offering fewer — but fuller — flights, and making a steady profit while doing so.

Look for airlines to employ more of the same strategy in 2013, says Rick Seaney, CEO of FareCompare.com.

“I expect them to continue to probably cut back seats, which means it’s probably [going to be] a good environment for them to charge higher prices,” he says.

In 2012, airlines attempted to raise prices about every three weeks. About half were successful.

Seaney says a few attempts at hiking fares in the first few weeks have 2013 have proven unsuccessful.

But no matter what you pay, Seaney says you can likely forget the days of basking in the arm room of that empty middle seat.

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