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
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.
Outside of some short seasonal sales, don't count on fares dipping in 2013.
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.
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.
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.
so many fare increases so far ... but we haven't seen a resulting
drop-off in demand," says Kevin Schorr, vice president of Campbell-Hill
Aviation Group, an airport and airline consulting firm.
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.
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."
Paying for a trip will look less like a prix fixe menu and more á la carte this year.
collected $924 million in baggage fees alone in the third quarter of
last year. They made another $652 million from fees to change
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.
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.
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.
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.
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
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
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 in Virgin 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.
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.
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."
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.
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.
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."
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.
Transportation Department has taken a more aggressive role in
protecting air travelers the last four years, and it isn't letting up.
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.
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.
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."
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.