The major U.S. airlines have imposed the third airfare hike in a month, , exceeding the total number of airfare hikes for all of last year, according to Rick Seaney, chief executive of Farecompare.com. As a result, consumers are paying, on average, $40 more than they were at the end of 2010.
Southwest Airlines jumped in late Friday evening and raised flight rates across most of its routes, Seaney says. Southwest rarely initiates a fare increase.
All the major lines have since matched including Delta, United and low-cost carrier Frontier.
Two days after Christmas, United Airlines and Continental Airlines imposed a $20 roundtrip "peak travel day" surcharge for most domestic routes. American then adopted the $20 fare increase on most flights and other major carriers matched the move.
"At this point, the carriers can pass through more gradual oil price increases to their customers," said Raymond Neidl, independent airline consultant. "Where the airlines would have a harder time adjusting [would be] a rapid increase in oil prices or high volatility due to unpredictable political developments."
An oil shock last hit carriers in 2008, when fuel prices spiked. But the recession stymied their success in increasing fares. So instead, they added ancillary fees for services that once came for free, like baggage check, curb-side check-in, pets, food and non-alcoholic drinks. Passengers griped but paid the fees anyway, resulting in billions of dollars in airline profits.
Airlines also cut capacity: They eliminated their least efficient flights to make sure that remaining flights were packed full so they wouldn't lose money on empty seats. On top of that, six carriers merged into three, lessening competition.
"The number of legacy carriers has declined by half in the last decade," said George Hoffer, transportation economist at University of Richmond in Virginia. "So it's much easier to coordinate price increases."
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