The skies feel very friendly for airlines

Tracey Samuelson Aug 31, 2015
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The skies feel very friendly for airlines

Tracey Samuelson Aug 31, 2015
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As an airline representative gives the boarding announcement for passengers who purchased tickets for seats with additional room, Alice Friedman stays seated in the gate area.

She opted not to purchase any of the extras the airlines offered on this flight, a quick hop from New York to Massachusetts. But she has paid for additional space on longer flights to Europe, for example.

Like many travelers, Friedman has heard about the airline industry’s improving bottom line, which can make its push to upsell passengers feel a bit uncomfortable.

“It’s not exactly unfair,” she says. “But it does create all sorts of problems, I think, for the ordinary traveler, the casual traveler, the people with kids.”

It’s looking like a good year for the industry, says Jean Medina, a spokeswoman with the trade group Airlines for America. Industry profits are up about 5 percent for the first half of the year, compared with the same period last year.

“Largely, that was driven this year by a drop in fuel prices,” says Medina, noting airline revenues were up only slightly.

How much of those savings should be passed along to consumers?

Decreases in ticket prices tend to follow drops in the cost of oil, though they typically lag a quarter, says Helane Becker, a managing director for Cowen and Company who covers the airlines. In July, the average fare passengers paid per mile of travel fell 3.5 percent year over year. “It may feel to some people that they’re paying more, but when you look at the absolute numbers, they’re not,” Becker says.

While those fares don’t include things consumers now have to pay for separately, Becker believes it makes sense to ask people to pay for the things they want. “You know, you can stay in Ritz Carlton or you can stay in a Motel 6,” she says, indicating passengers have a choice in the level of service and amenities they choose.

She says airlines are companies, not public utilities. But consumer advocates disagree.

“The fact is, it’s in many ways a utility that’s treated as a free enterprise,” says Bill McGee with Consumer Reports. McGee says the airlines are vital to the American economy and people’s lives. However, because of consolidation in the industry, airlines have less competition and people have fewer choices.

He thinks airlines should be passing more of their fuel savings on to consumers. “There has been a slight decrease [in fare prices], but it’s in no way correlated with the savings they’ve seen in fuel,” he says.

Plus, McGee says with the fees and extras, it can be hard for consumers to figure out what their final fare will be, which makes it hard to price shop. 

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