Airlines are showing profits, so those fare sales could wane

Good times are finally back for the nation's airlines. For travelers, that means it's getting harder to find bargains.

The summer travel season got off to a roaring start, fares are up, and money is rolling in from fees on things such as checked baggage.

The six biggest U.S. airlines earned about $1.3 billion in the second quarter and more profits are expected for the rest of the year.

Even so, airlines are still woozy from the one-two punch of record-high fuel prices followed by a recession. Those six big carriers lost $22.7 billion in 2008 and 2009. And that's just a portion of the $63.35 billion that U.S. passenger airlines lost from 2001 to 2009, according to the Transportation Department.

There were plenty of fare sales when the airlines were struggling to fill seats. Now those seats are in demand, so deals are less common.

Here's a look at what travelers can expect in the months ahead:

The airlines are hooked on fees after two years of using them to overcome, first, high fuel prices and then slumping travel demand. A new study shows that worldwide, carriers took in $13.5 billion from fees in 2009, a 43 percent jump in just one year.

"Fees are going to stick and they're going to become more pervasive," says Jay Sorensen, a former airline executive who is now president of consulting firm IdeaWorks, which did the study on fees.

Airlines have been able to boost ticket prices, too. Summer fares are up an average of 18 percent, according to figures from a trade group for the big airlines. Travel demand will taper off as fall approaches — Continental Airlines already is seeing that. Still, airlines will try to avoid slashing prices.

Planes are stuffed like never before. Including regional flights, Delta filled 88 percent of its seats in June, Continental sold 87 percent.

"Leisure demand has been strong, and we expect it will remain so throughout the remainder of the summer," Continental CEO Jeff Smisek told analysts.

Normally when airlines start making money after a slump, they're tempted to add new flights to snag returning travelers. This time might be different. Sluggish bookings and concern about the weak economic recovery will put pressure on airlines not to add flights that might operate half-empty.

Shares of Delta Air Lines Inc. were punished last week partly because the world's biggest airline said it would increase passenger-carrying capacity up to 3 percent next year. Too soon, investors seemed to be saying. If the airlines add too many flights, it will increase their costs and push fares down.

Several large U.S. airlines are in the middle of labor negotiations that could lead to higher costs and even disruptions for travelers.

The most acute problems are at American, where flight attendants and some ground workers are talking openly about possible strikes this fall. American's parent, AMR Corp., spends 30 percent of its revenue on labor compared with 18 to 22 percent at the other big airlines.

Unions at UAL Corp.'s United and Continental Airlines Inc. need to work out a combined contract that will take effect if the airlines complete their planned merger. Delta faces unionization votes by flight attendants and ground workers.

Unions are frustrated and want to make up for past wage and benefit cuts. But whether that means they'll walk off the job and leave passengers stranded is another question. Federal law makes it hard for unions to strike.


Koenig reported from Dallas, Freed from Minneapolis.

AP-WF-07-26-10 2229GMT

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