As Airplanes Fly Fuller Loads ...
Percentage of seats filled annually, 2000-2011
The rest of the economy may not be doing great, but airlines are expecting a banner year. Profitability is up and fuel prices are declining, but that's not necessarily great news for consumers.
When Robert Herbst, a former pilot and industry consultant for many years, says the skies are blue, it sounds pretty convincing. And from Herbst's projections, this may be a historic year for the airline industry.
Airlines are better at playing the supply-and-demand game to their advantage by consolidating and becoming more efficient, Herbst said. Flights are down in the past decade, which helps fill empty seats and raise ticket prices.
"Having the airlines profitable, I think, is much better for the consumer in the long run than it is to have these constant stream of airlines going in and out of business," he said.
... Industry Profits Rebound
U.S. airline operating profits/losses, in billions, 2000-2011
Airlines run on tight profit margins of about 3 percent. Herbst said higher margins may mean companies will start investing in customer service again.
However, passengers may not see cheaper fares or fewer fees.
"Consumers are asking, 'Hey, oil prices have gone down 20 bucks in the last few weeks. Am I going to see cheaper ticket prices this summer?' The answer is no," said Rick Seaney, co-founder of travel site FareCompare.com.
In fact, Seaney said, most of the airlines that tried to hedge against rising fuel costs lost money on those bets as oil prices fell sharply.
And anyway, airlines are trying to raise — not cut — prices. Companies have boosted prices nearly 10 times in the last year, and fares on nonstop flights are increasingly more expensive.
"It's not that easy to get a deal," Seaney said. "I like to call it, sort of, this summer's like getting a better bad deal."
But he said with many airlines flying more efficient, newer planes, there are some customer-service benefits. More flights are arriving on time with fewer lost bags.