Air fares have been creeping up in the last year. The biggest increases are hitting business travelers, but even families who fly once a year for vacation are finding higher prices in many markets.
Strong passenger demand, reduced competition at many airports, a marketing emphasis on service rather than low fares and the quest for improved earnings by the airlines have exerted a steady upward pressure on fares, according to industry officials and analysts.Air fares, particularly discount fares aimed at the pleasure traveler, still go up and down with seasonal demand. But, said Pat Lilly, director of pricing for United Airlines, "the trend - especially since the end of 1986 - has been generally upward."
As a result, some analysts predict record earnings for air carriers in 1988.
In May, fares were up about 14 percent from a year earlier, and in June they were up between 10 percent and 12 percent over year-ago levels, said Julius Maldutis, an airline specialist with Salomon Brothers Inc.
"It's the first time in a long time that we have had a virtual cessation of the bloodletting that had dissipated earnings," said Maldutis.
One person's bloodletting may be another person's cup of tea, however. While airlines were suffering through the fare wars that flourished in the wake of airline deregulation, consumers benefited.
As a result of habits formed during the days of relatively cheap flights, when airlines sought to lure additional passengers, "discretionary" travelers have become a much larger segment of the flying population. According to Maldutis, discretionary travel has increased from about 43 percent of all traffic to approximately 53 percent.
Discounts will continue to be available to passengers who can afford to shape their travel around the airlines' requirements, industry officials said. As airlines have increased their ability to fine-tune fares, they also have offered a wider and ever-changing panoply of advance purchase requirements and limits on refundability of tickets.
"On a general basis, we have tried to keep the fares used by discretionary travelers at a very attractive level," said David B. Kunstler, senior vice president of planning for Eastern Air Lines. Although discount fares have risen, they have risen by proportionately less than business fares-which take advantage of a market with relatively inflexible travel plans.
"The carriers are improving significantly in knowing how to price properly," said George James of Airline Economics Inc. "They know how to price in order to maximize revenue on a particular day, at a particular time, in a particular market and at a particular season of the year," he said.
The discount fares fill empty airplane seats with passengers who would not fly at higher prices. For instance, Eastern recently reduced round-trip childrens' fares to Florida in an attempt to entice families who might otherwise drive.
Discount fares have developed a strong seasonal pattern, going up during the summer when airplanes are full. In the fall and winter, "guess what else happens," said Bruce Hicks of Continental Airlines. "Fares come down. There's much more seasonality."
But passengers are also learning to shop for seasonal bargains, according to United's Lilly. Like consumers who buy bathing suits at the end of the summer season, price conscious travelers are booking flights in the off-peak months. "What has happened through this seasonal pricing is that March has become one of the strongest months we see now for the airlines," said Lilly.
The price increases generally have provoked few protests. Ron Miller of American Airlines said that higher prices have been tolerable because they have come gradually.
Prices are likely to rise further, according to analysts. The death of such discount airlines as People Express, the negligible economic impact of the October stock market plunge and financial pressure on Continental - which often has exerted pressure on other carriers to reduce fares - all will contribute to the strength of prices, they said.
But, "the discount fares will not go away," said Salomon Brothers' Maldutis. "The airlines may change the availability of the fares and the restrictions. You may have to wear one red sneaker and one blue sneaker and buy the ticket after 11 p.m.," but bargains will still be there for leisure fliers, he said.