Earlier this week, United and its airline alliance partner Air Canada succeeded in raising prices on routes heading to or through Canada. Maybe you’re thinking, “Big deal, I’m not flying to Canada” but this latest hike holds lessons for every traveler. First, some background – then, some tips – and finally, some predictions.
Anatomy of an Airfare Hike
A couple of thoughts on why this hike succeeded even though we are entering the seasonally slower travel period (outside of the holidays).
Trans-Canadian fares are already pricey. Adding another $10 roundtrip is similar to adding that amount to last-minute business travel fares – so overall, percentage-wise, it doesn’t add much.
Airlines still must have broad matching for hikes. Matching by peers, that is, which in a case like this would typically include Canadian low-cost carrier WestJet (which plays a role not unlike Southwest’s when it comes to U.S. domestic hikes). If WestJet joins in, a hike is guaranteed success.*
The merger matter. Although I was a bit surprised to see American and US Airways matching before their all-important antitrust trial date in late November – I didn’t think they want to give the Department of Justice any ammunition – since the DOJ’s concerns are largely limited to domestic U.S. routes and such, this doesn’t really provide much fodder.
Fuel prices. Although kerosene jet fuel prices have been relatively stable since early 2011 (with a couple of dips that have helped the airlines), the overall trend for jet fuel is the same as for oil: prices are rising. This trend is worrisome especially lately with elevated fears due to the situation in the Middle East.
*Note: An airline cannot unilaterally raise prices without broad acceptance of its peers (and by acceptance I mean matching the newly-hiked prices). Otherwise, this leaves the initiating carrier out on a limb with higher prices “at their store” which can quickly reduce bookings due to the all the comparison shopping that goes on.
What Hikes Mean for Airfare Shoppers
When an airline raises prices, it’s performing a test. It is probing to see whether its peers (the competing airlines) and we the public will accept higher fares. So far, it’s been hit and miss in 2013 with the level of acceptance for hikes at about 20%. Shoppers should follow news about these hikes, and follow these tips:
Shopping on weekends can be risky. Many hikes (though not all) are launched in time for weekend shopping which obviously means you might pay more than you have to. This year, for example, Delta launched a hike just in time for the Labor Day weekend, but rolled back prices by Monday – therefore, shoppers who purchased tickets over that weekend from carriers who participated in the hike paid too much.
Don’t procrastinate. We’ll likely see more hike attempts this year (and more on that below) so do not wait too long – certainly not until the last minute – to do your airfare shopping.
Predictions are always tricky (which is why I keep my worry beads next to my crystal ball) but I do expect carriers to probe for hikes at least on a monthly basis for the rest of the year. However, given the recent moribund economic numbers – and the all-important November trial as would-be merger partners American/US Airways square off against the Justice Department – I don’t expect a rapid acceleration in the current pace.
One more thing to add to the mix: It is iffy as to whether a broad-based hike will succeed before year’s end without Southwest’s participation – and so far, they have been reluctant to join in.