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High Airfares Greet Holiday Travelers

A Southwest Airlines jet. i

Even airlines with low cost structures, like Southwest, have raised airfares this year. The average ticket price is the highest it has been in 13 years. Scott Olson/Getty Images hide caption

toggle caption Scott Olson/Getty Images
A Southwest Airlines jet.

Even airlines with low cost structures, like Southwest, have raised airfares this year. The average ticket price is the highest it has been in 13 years.

Scott Olson/Getty Images

Nothing puts the ho-ho-hum in the holidays like sky-high prices for airline tickets.

Last-minute holiday travelers are in for some sticker shock: Average ticket prices are already at 13-year highs, according to the Bureau of Transportation Statistics.

At the end of the second quarter, in June, the average price for a domestic fare was $352, an 8.3 percent increase from the $325 average in 2007. (The previous high was $347.74 during the first quarter of 2001.)

But that $352 average fare doesn't factor in the additional fees that passengers may pay at the airport or onboard the plane for checked baggage, food and beverage — even a blanket and pillow.

Consider stuffing some extra cash into your pockets before you fly. By the time you add $25 or $100 on top of the fare — typical fees for second or third checked bags — the real out-of-pocket cost for consumers represents a huge increase in airfares, says airline consultant Robert Mann Jr., president of R.W. Mann & Co.

Thanksgiving through New Year's is typically a period when the once- or twice-a-year air traveler hits the skies. And analysts say they should brace for added fees.

"The potential for the consumer to be surprised is greater now than it used to be," says Dean Headley, the co-author of the annual Airline Quality Rating and an associate professor at Wichita State University. That's especially the case for infrequent travelers who fly during the holidays and will encounter ticket prices that are no longer all-inclusive.

While consumers can find discounted fares on plenty of Web sites, Headley says people are starting to migrate to airlines' corporate Web sites to grasp the range of added fees.

"The only way that you'll really know the full cost is to go the Web site of the individual airline and find out what the cost is for the extras that you may or may not use," he says.

Amy Ziff, editor at large for Travelocity.com, says visitors to her site encounter fare notes, a reminder of the fees that they may encounter during the travel experience. She expects such fees to proliferate as airlines engage in even "more aggressive a la carte pricing" in 2009 and beyond.

The Search For Seats

The airline industry has already reduced the number of flights and seats available for passengers by between 15 percent and 20 percent, Headley says. American Airlines is now flying 500 fewer flights each day on American and American Eagle, according to a spokesman.

"Right now, the available seats for the flying public is about the number of available seats we had after Sept. 11, when they had this 20 percent shutdown," Headley says. What's more, there's "not a lot of room for error in the system."

So if a mechanical problem or bad weather leads to a delay and cancellation, consumers could end up waiting as long as two to three days to reach their destination.

For Thanksgiving, Ziff says there are 2.6 million fewer seats on direct flights, and that capacity has been reduced by 11 percent compared with 2007.

Headley estimates that by the end of 2008, there will be about 15 percent fewer seats available than at the start of the year. "That means that middle seats are full, and those seats are producing more revenue per seat. That's all to the advantage of the airline," he says.

The good news is that airlines will be using some of that revenue to purchase new airplanes. The bad news: Airlines aren't likely to decrease airfares in the near future.

Holiday Outlook

Basili Alukos, an equity analyst who covers the major airlines for Morningstar, says the high ticket prices are industry-wide, even for airlines with low cost structures, such as Southwest. He says Southwest's ticket prices were 18 percent higher in the third quarter, compared with the same period last year.

A survey conducted by Kayak.com, a travel research Web site, revealed that more than 63 percent of travelers have yet to book for the holidays. Brian Harniman, an executive vice president at the site, says Kayak.com's travel experts are encouraging consumers to book now, rather than wait to hunt for bargains.

"Airlines are taking a lot of their planes out of service, so there's less supply," he says. "And demand is pretty much what it was last year." He says prices for this holiday season are already up by as much as 30 percent over 2007.

Kayak.com's survey found that 27 percent of people said they won't search for holiday travel bargains because they've canceled holiday travel plans as a result of the economic downturn. The remaining 73 percent, who said they would travel, plan to watch their expenditures more closely.

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