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United Airlines is the latest carrier to announce it's cutting back on 2011 expansion plans...

"Starting with their May schedule, United and Continental will offer fewer flights on some routes, exit less-profitable routes and postpone the start of some new flights, such as service from Newark, N.J., to Cairo, that had been slated to launch this spring. Airlines, like other transportation industries, have been squeezed as crude oil prices have spiked in recent weeks due to unrest in the Middle East. But carriers also are facing near-record refinery costs for jet fuel as aging U.S. refineries have reduced capacity this year. Jet fuel traded at $128.20 per barrel the week of Feb. 25, up 50 percent from the year-ago levels, according to the International Air Transport Association."

Read the rest of the story from the Chicago Tribune.

 

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Mar 04 2011 Gale Warning BY adminTAGS Fares

 

We’ve hiked the gale warning flag.

Telltale signs have been with us for the past few months, but in the past few days it’s become obvious: the airline industry is getting ready to batten down the hatches and do everything it can to weather rising energy prices. For airline customers it means fewer available seats and much higher fares.

The obvious culprit for rising energy prices is the civil unrest in the Middle East, but there’s more to it. Look at what’s been happening to the spot price of a gallon of jet fuel since last September:

 

  • Aug 30: $2.059
  • Sept 13 : $2.129
  • Oct 4: $2.226
  • Nov 8: $2.372
  • Dec 6: $2.439
  • Jan 18: $2.663
  • Feb 22: $2.880
  • Feb 28: $2.998
  • March 2: $3.147

Want to know why fares are going up? You’re looking at it.

In the past week and half we’ve heard rumblings that the airlines will make big third quarter cuts in capacity (meaning number of seats in the air). Fewer seats means higher fares.

Earlier this week Bloomberg news reported on American and Delta.:

“American originally said it would boost…capacity 4.3 percent” in 2011.” “In light of the current environment, in particular recent fuel price trends, we are trimming back our capacity plan for 2011,” said Andy Backover, an American spokesman. Delta on Feb. 3 lowered its plans for capacity growth this quarter to no more than 5 percent, down from earlier plans to expand by as much as 7 percent. The airline said at that time it was “revising full-year plans to reflect new fuel levels,” without giving specifics.

Meanwhile, “The International Air Transport Association has cut its forecasts for 2011 global airline profits because of the recent surge in crude oil prices.”

In a sure sign that interesting times are ahead, Allegiant said this in a letter to the Department of Transportation (DOT):

"Allegiant is considering a new pricing option for use on its website: when making a purchase, consumers would be able to choose between a traditional "locked in" fare that would not fluctuate, and a lower fare that could change before the date of travel. That lower fare could be reduced further or could increase (up to a set maximum that would be clearly disclosed) depending on changes in fuel price between the booking and travel dates. This would be a non-compulsory alternative for consumers; it would provide them another option for potential substantial savings on their trip costs and would be clearly disclosed and explained prior to any purchase."

Is this going to happen — will you be able to purchase a floating fare? Last year the DOT wrote consumer protection rules that are still just proposals. These proposed rules would forbid floating fares. Allegiant is trying to make a case for them now before the proposals become law:

"The potential to offer this alternative is especially important for Allegiant. First, even a slight change in fuel cost has a major financial impact on Allegiant, as it does on other air carriers (as the Department is aware). Second, Allegiant caters specifically to leisure travelers. This means, among other things, that a high proportion of Allegiant customers purchase their travel significantly in advance of their travel dates—in many cases months in advance—making it especially difficult for Allegiant to predict what the fuel price might be at time of travel. Preserving the ability for carriers to offer and consumers to choose between a locked-in price and a price that may change, within limits, based on the price of fuel, strikes an appropriate balance between the interests of consumers and the interests of carriers."

Will the DOT listen and grant Allegiant's wish? I'd guess not. Current DOT leadership hasn't shown much interest in airline financial problems.

 

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The New York Times does a good job of summing-up the state of aviation in small town America...

"The country’s network of plentiful regional airports connecting to big hubs was largely built in an era of $30-a-barrel oil. But oil prices are now more than triple that, so maintaining commercial airline service to underperforming airports may be unsustainable."

To be clear, when the story talks about communities completely losing service, it's not talking about airports like Springfield. It's talking about smaller cities — Missouri cities like Joplin, Columbia, Cape Girardeau, Waynesville and Kirksville. Closer to us, there's Harrison, Arkansas. All the airports just mentioned have, or have had, Essential Air Service (EAS).

Our airport does, though, feel some of the pressures described in the story:

"Since airlines typically fly turboprops and 50-seat jets on the routes that connect outlying communities to big hubs, the higher cost of fuel and other expenses gets split among fewer passengers. Airlines are retiring these planes because they are unprofitable as oil prices climb."

For those of you wondering about the size of the airport profiled in the story, in Traverse City, Michigan... In 2009 it ranked 179 in terms of total passengers.

This will give you a feel for the size of the airports talked about here, and in the Times story. This shows each airport's ranking out of the nation's 538 airports with commercial air service in 2009:

  • Springfield-Branson National, Springfield, Missouri: 124
  • Cherry Capital Airport, Traverse City, Michigan: 179
  • Columbia Regional, Columbia, Missouri: 306
  • Waynesville-St. Robert Regional, Forney Field, Ft. Leonard Wood, Missouri: 453. EAS.
  • Joplin Regional, Joplin, Missouri: 481. EAS.
  • Cape Girardeau Regional, Cape Girardeau Missouri: no service in 2009. Currently has EAS service.
  • Kirksville Regional, Kirksville, Missouri: no service in 2009. Currently has EAS service.
  • Boone County Regional, Harrison, Arkansas: no service in 2009. Currently has EAS service.

 

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The consultant who's writing our airport's new master plan has compiled a list of the airlines serving our airport since airline  deregulation in 1978. Take a look at the chart. It vividly illustrates the huge changes in the industry.

 

See the service to Tulsa, Kansas City and Little Rock? A present day airline wouldn't even consider serving those near-by cities. And notice all the big jets the airlines used to serve this market before 2001 — the 737s and 727s. These days the airlines use regional jets to fly into small markets like ours. The regional jets are denoted as the CRJs and ERJs.

 

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Feb 22 2011 Fares on the March, Redux! BY adminTAGS Fares

 

wingsdollars1Most airlines tried raising fares last week, but they didn't stick because US Airways wouldn't play ball. This week, "American, United, Continental and US Airways raised prices Monday by $20 to $60 per round trip on some tickets favored by business travelers." That's according to the Associated Press. Oil prices are the culprit, not to mention the fear of energy prices going substantially higher due to the unrest in Egypt and Libya. Get the deep background from Flightglobal.

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