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Lower fuel prices boost airline profits, but fares to hold steady

Posted on February 03, 2016 by Guy Paquette

The nation's airlines are reporting soaring 2015 profits largely because of sinking fuel prices. The record income, however, isn't translating into big cuts in airfares.

In hopes of appeasing travelers, some carriers are buying newer planes and remodeling terminals. One airline has even brought back free snacks for economy-section fliers.

In earnings reports released this week, executives from the country's biggest carriers crowed about profits that have surpassed totals reported before the Great Recession and the 2001 terrorist attacks.

"Our 2015 performance was a record for Delta on all fronts," said Delta Air Lines Chief Executive Richard Anderson, whose airline reported $4.5 billion in net income for the year, compared with $659 million in 2014.

The airlines can thank demand for air travel that increased up to 9% last year, while the price of fuel —one of the airline industry's biggest expenses — dropped more than 30%.

Despite the plunge in fuel costs, domestic airfares for the year have changed little from 2014.

According to Farecompare.com, a site that tracks ticket prices, the cheapest domestic airfare rose by 1.5% in 2015 over 2014. The U.S. Department of Transportation has yet to calculate airfares for the entire year, but the average domestic fare for the first six months was $388, down less than 1% from the same period in 2014.

As long as demand for air travel remains strong, airlines are not under pressure to slash fares, said Seth Kaplan, managing partner for the trade publication Airlines Weekly.

"These business are not charities, and they are not going to give consumers benefits just for the sake of doing it," he said.

Because of a series of mergers over the past decade, more than 70% of all domestic traffic is now controlled by four airlines, said Richard Gritta, a University of Portland finance professor and airline expert. The big four carriers — Southwest, American, United and Delta — controlled 50% of U.S. air traffic 10 years ago.

"Why would they want to cut fares when we don't have a choice if we want to fly?" he asked.

Don't expect to get a discount on those fees to check bags, either.

If airlines were to sharply reduce or eliminate all passenger fees, most of the airline industry's profits would evaporate, said Henry Harteveldt, travel industry analyst for San Francisco-based Atmosphere Research Group.

"If someone is looking at these profits and thinking 'Does that mean bag fees will go away?' The answer is not only no, but very much no," he said.

Airline executives say they are sharing the wealth with passengers by investing some of their windfalls into new planes, better amenities and remodeled terminals. They're also giving raises to employees and dividends to investors.

Delta announced in December that it plans to order 20 Embraer 190 jets and 20 737 planes from Boeing. The 737 jets feature larger overhead bins and upgraded audio-video entertainment systems in the seat backs. The planes are scheduled to be added to the fleet by 2019.

United Airlines, which reported a net income of $7.3 billion for 2015, compared to $1.1 billion the previous year, announced plans to buy 40 new Boeing 737-700 planes that will enter its fleet beginning in mid-2017. Some of the new planes will be used to replace smaller, 50-seat planes operated by the carrier's regional airline.

Starting in February, United also plans to bring back free snacks to passengers in economy seats, with Dutch caramel-filled waffles served in the morning and rice crackers, mini pretzel sticks and ranch soy nuts offered during the rest of the day. Coffee, juice and other nonalcoholic drinks are already free.

Southwest Airlines, which reported $2.2 billion in net income in 2015, up from $1.1 billion in 2014, plans to speed up the retirement of more than 120 Boeing 737 planes, many of which are at least 15 years old. The old 737s would be replaced by new aircraft with modern amenities such as wireless Internet.

The flurry of plane ordering doesn't mean that airlines will be adding lots of flights. Some of the new equipment is replacing old planes, and carriers are being careful not to expand overall capacity by too much, which would have the effect of lowering fares, industry experts said.

The good news, according to industry experts, is that the lower fuel costs have allowed ultra low-cost carriers such as Spirit Airlines and Frontier Airlines to expand, which puts pressure on the larger carriers to keep fares from rising in those routes served by the low-cost carriers.

Denver-based Frontier announced this month plans to launch 56 new routes beginning by June, a 40% increase from the carrier's current 120 routes. In November, Spirit added seven new routes from Los Angeles International Airport to such destinations as Seattle, Oakland, Phoenix and Denver.

Delta, American and United have already taken steps to keep the ultra low-cost carriers from luring away too many customers.

Three years ago, Delta Air Lines introduced extra-cheap tickets, dubbed Basic Economy fares, which are nonrefundable, can't be upgraded or changed and don't let passengers choose their seats. The fares were originally launched in response to competition from low-fare carriers flying out of Detroit but Delta has since expanded the Basic Economy fares to other routes.

Fort Worth-based American Airlines announced two months ago that it will launch a no-frills, bare-bones fare. The carrier has yet to reveal details of the new fare, which start this year.

Not to be left behind, United Chief Revenue Officer Jim Compton said this week that the Chicago-based carrier will introduce an "entry-level fare" that will be directed at "price-sensitive customers." The new fare category will be available in the second half of this year.

Posted in airlines, travel

What happens to your TSA confiscated foods?

Posted on January 29, 2016 by Guy Paquette

According to a new behind-the-scenes video by Great Big Story, those illegal imports end up in the hands of agents like U.S. customs supervisor Ellie Scaffa, who personally sorts through—and ultimately disposes—up to 600 pounds of fruits and vegetables a day per terminal at New York’s JFK Airport. “I’ve been threatened with my life,” she says about her efforts to protect American agriculture from threats like Chinese beef candy, Jamaican mangoes, or peppers from Guyana.

And no, she doesn’t get the privilege of eating your epicurean souvenirs, as many travelers might suspect. All confiscated goods—whether they be shrink-wrapped Swiss Gruyère or fresh rambutans from Thailand—get manually inspected for bugs and parasites, dumped into a contraband bin, and ground up in a supersized InSinkErator, where they meet their ultimate death.

Just do us a favor—don’t get caught with the really good stuff. Watching beautiful cured meats go down the drain might be the finest example of a first-world problem, but it still comes with its fair share of heartbreak.

The Future of Airport Security...

Posted on January 29, 2016 by Guy Paquette

It’s been a while since the TSA rolled out those controversial full-body scanners. But officials have been quietly testing out new technology that could change how we fly.

One study has reported that by 2023, airports could spend over $12 billion on security technology, up from $8 billion last year.

At Cleveland Hopkins airport, they recently tested a system to detect people who try to bypass security to get to the gate.

Usually, it’s up to security officials to spot these so-called “gateskippers,” which could end in an airport lockdown. But with this new video system, they can detect these people before they reach a secure area.

Researchers at Los Alamos National Laboratory developed a new technology called MagRay that examines liquids in carry-on bags. The idea is to identify potentially harmful liquids from safe ones, even if they appear identical to the naked eye.

While it’s not exactly new, more airports around the country are now installing the CLEAR system, which uses fingerprinting and iris scanners to help expedite the security process.

For more information about the TSA and airport security, check out:

New Rules for American Airlines and US Airways on Baggage Fees and Free Flight Rewards..

Posted on April 08, 2014 by Guy Paquette

DALLAS (AP) — If you use miles to get a free ticket on American Airlines, you may have to pay to check that suitcase.

American and US Airways announced changes Tuesday to their policies on checked-bag fees and redeeming miles for free flights.

Passengers traveling on American on miles they earned or who paid full price for an economy seat won't get free checked bags anymore. Some elite-level frequent fliers on both airlines will get one less free bag than before.

When it comes to redeeming miles for free flights, US Airways is ending blackout days. American will change the number of miles to get an unrestricted free flight — more on popular travel days, fewer on less-busy ones. And it's making an array of changes to the miles needed for international trips.

Suzanne Rubin, an American Airlines vice president who oversees the AAdvantage loyalty program, said the changes will increase revenue but she declined to give a figure.

The two carriers merged in December and formed American Airlines Group Inc., and Tuesday's changes are designed to bring the policies of the two closer together. Between them, they have 110 million loyalty-program members, Rubin said.

Other changes:

— For U.S. travel on or after June 1, American members can redeem miles for an unrestricted "AAnytime" award at 20,000 miles, 30,000 miles or 50,000 each way instead of the current 25,000-mile flat rate. The less-flexible "MileSAAver" awards will continue to start at 12,500 miles.

— Mid-tier elite members (platinum on American; gold and platinum on US Airways) will get two free checked bags; a reduction of one for the US Airways' Dividend Miles elites.

— Lower-level elites (gold on American; silver on US Airways) will get one free checked bag, a reduction from two for the American customers.

— Removing a charge for second checked bags on trips to South America.

Rubin said the company was not considering charging a fee for carry-on bags, as Spirit Airlines does.

Posted in airlines, travel

Apps that we recommend for your next trip...

Posted on December 04, 2013 by Guy Paquette

It's so easy to forget that one key item like a charger and have to waste money buying yet another replacement on the road. On the other hand, it's easy to over pack and lug around extra weight or bags as you travel. Packing lists, on apps or paper, help a lot, but making them from scratch can take forever.

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Posted in apps, packing, packing tips, travel

New Travel Worthy Safety Apps…

Posted on October 08, 2013 by Guy Paquette

Another thing that we do at Bagot Leather Goods is try to keep you safe and comfortable during your travels. The American Red Cross has launched a host of new apps that can help in a crisis situation. Among them is their Tornado Warning App which sets off an audible siren even if your phone is off; www.redcross.org/prepare/mobile-apps

 

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Posted in apps, earthquake, first aid, hurricane, safety, shelter, tornado, travel, wildfire

Liquid Carry-On Rules

Posted on January 24, 2013 by Guy Paquette


Air travellers may carry liquids, gels and aerosols in their carry-on bag when going through security checkpoints. The term "3-1-1" refers to three ounce containers, all in a one quart bag, one bag for each traveller.

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