Act fast: Low fares are edging up
Smarter growth could mean higher fares for bargain hunters
By Chris McGinnis
CNN Headline News
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Airfare expert Terry Trippler of cheapseats.com: "Low-fare carriers cannot offer those $39 fares forever. Eventually, they are going to have to raise fares to offset rising costs."
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(CNN) -- In the last month, we've seen JetBlue high-tail it out of Atlanta, Midway Airlines liquidate and Southwest Airlines announce the end to a long-standing (and expensive) double frequent flyer credit promotion. In Europe, low-fare powerhouse Ryanair hinted that it would cut some under-performing routes to shore up profits.
Last week, American Express reported that the average lowest discount fare in the United States has increased from $98 in September 2002, to $103 this past September. A small increase for sure, but the fact that average fares are increasing instead of decreasing is huge news for airlines.
All this points to what could be the beginning of a new phase of smart growth (versus explosive growth) for low-fare carriers. And it could mean higher prices for bargain hunters.
"Low-fare carriers cannot offer those $39 fares forever. Eventually, they are going to have to raise fares to offset rising costs," says airfare expert Terry Trippler of cheapseats.com. "We don't need Greyhound-style prices from airlines -- that's what Greyhound is for."
In addition to the American Express figures, there are more data showing low fares on the increase. In Atlanta, AirTran's latest fare sale offered one-way fares of $105 between Atlanta and Los Angeles or San Francisco, California. A month ago, that fare was $99, and before JetBlue announced that it would bail out of the market because of "irrational competition," fares between Atlanta and the West Coast dipped as low as $79 one-way.
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Low fares are creeping up in other markets, too. Bob Harrell, president of Harrell Associates, a firm that tracks airfares, provided data that show how low-fare leader Southwest Airlines has recently bumped up its lowest fares in certain markets between 45 and 55 percent. For example, on the busy Los Angeles-to-San Jose run, the lowest published fare on Southwest has risen 54 percent, from $36 to $55, since January.
In addition, Southwest fares between Dallas and Houston, Texas, have increased 44 percent, from $32 to $46, since January.
"While you have to factor in seasonality, the fact is that the lowest fares are on the rise," Harrell says, adding, "Low-fare carriers are responding to improving economic conditions and are taking advantage of increased demand."
Demand has increased so much on Southwest that at the end of the year it will pull the plug on its long-standing offer of double Rapid Rewards credits to those booking trips at southwest.com.
"The promotion has successfully completed its mission," marketing Vice President Joyce Rogge says.
So, bargain hunters, those fares that have seemed too good to be true over the last few years may end up being just that. But the good news is that smarter growth and incremental fare increases should keep the low-fare carriers healthy. And that means that we'll still have low fares -- but maybe not quite as low as we've grown accustomed to.
