Airline Tickets are Going Up — Here’s Why

Planning on getting away for a vacation this summer? If so, it might be a good time to cash in any frequent flier miles you’ve been stockpiling. Or rent a car and drive instead of flying. We say this because airlines are warning consumers that prices to fly are likely to escalate this summer.

Why? Because gas prices are higher, and being that fuel is a major expenditure, airlines need to adjust the costs of their tickets in order to maintain profit. It’s not ideal news, but it’s likely to be reality – at least in the near-term.

Airline Fuel Prices

Delta says it is paying about 50 percent more for fuel than it did a year ago. American Airlines has stated that it expects to pay about $2 billion more on fuel in 2018 than it did last year because of the higher prices. The good news is that airplanes are made to operate much more efficiently that in the past, yet fuel still makes up a little less than a quarter of the average airline’s operating costs. That’s still significant.

In addition to higher fares, some other things airlines may be forced to do to maintain profit margins include:

  • Running fewer flights: Fewer flights means less fuel is used. It’s worth noting that many airlines already run fewer flights compared to years ago, meaning more packed planes. Can they really run any fewer?
  • Eliminating routes: This could be another way to manage costs, eliminating some of the lesser popular routes that carriers fly.
  • Increasing other costs: The lighter the aircraft, the more fuel efficient it is. And what’s one thing that can really weigh down an aircraft? Luggage. Don’t be surprised if some airlines keep base fares comparable with what they are now, but charge more for checked luggage or even for carry-on luggage. You might even see some airlines institute a charge for luggage based on how much it weighs, with heaver suitcases costing more to check than lighter ones.

The good news in all of this is that airlines still expect to be very profitable this year, albeit down a bit from last year, so there’s no major panic. But still, adjustments will need to be made – and when it comes to a rising operating costs, it normally gets passed down to the customer.

How You Can Manage Higher Airline Costs

Whether you’re planning that dream family vacation this summer or you travel for work and have to stay within certain spending limits, there are ways to navigate higher airline prices. Here’s a look at some of them:

  • Apply for an airline-specific credit card: You don’t just earn miles when you spend with an airline credit card, but you’re also often privy to other benefits, such as priority boarding and at least one free checked bag. Plus, most airlines offer really good incentives on signups when you meet certain spending limits. Delta’s line of American Express cards offers tens of thousands of bonus miles on signups.
  • Consolidate your rewards points: If you travel often, chances are you have rewards points stocked up with various hotels, rental car companies, etc. See if you can consolidate them so that they all go toward your frequent flier mile account. This can help you earn than complimentary reward ticket.
  • Drive: This likely isn’t practical for individual travelers, but if you’re planning a vacation with your family, it’s an option worth considering. If airline prices are high, it might be worth it to rent a car and drive to your destination. Yes, cars still use gas, but renting a car for a week and filling it with gas can be more affordable than buying several airline tickets depending on the circumstances.
  • Shop around: Every little cost adds up, so make sure you’re considering everything when weighing your airline options. For example, if you see comparable airfare on competing airlines but one charges for checked luggage while the other doesn’t, choose the latter to save money. You may also be able to save some money on a fare if you’re OK with getting your seat assignment at the gate.

Fuel is expensive right now, and fliers are likely going to feel the pinch. It won’t last forever, but be sure you know how to keep costs manageable for now.

Regards,

Ethan Warrick
Editor
Wealth Authority