When I was a kid, my father would -- on rare occasions -- allow me to watch "Carnac the Magnificent" on Johnny Carson. For some reason, humor and predictions fascinated me.
So, if you don't mind, I'm going to put on my turban and start prognosticating what will happen with the airline industry in 2009. Will the price of your tickets go up -- or down?
Let me backtrack for just a sec. I recently saw an article that predicted airfare would drop steadily in the New Year. Sorry, that's a little too simplistic. The current recessionary situation, while bleak, still favors the side of the airlines. So, let's get to the bottom line first.
Overall, I believe that domestically, 2009 will be the year of the airline ticket sale. Before everyone gets overly excited, let me remind everyone that generally less than 15 percent of seats on a plane are sold at sale prices. This is because many of these sales will be for off-peak travel days, connecting flights and purchases 14 days or more before departure. Unfortunately, most air travelers (yes, this means all the procrastinators out there) won't be eligible.
Outside of these sales, domestic ticket prices will stay at or near post-9/11 highs. In fact, I think 2009 prices could actually go a bit higher than that, if you factor in costs like the fees that were added last year for everything from bags to better seats.
Yes, from time to time, we will see excellent airfare sales (as we saw during this holiday season), but fares as a whole will not drop permanently. On the international front, however, the picture will be brighter.
Between the summers of 2007 and 2008 we had more than 30 attempted airfare hikes, and most of them were successful.
Since then, the airlines have shown unusual discipline in cutting seats, cutting employees and merging when necessary (Delta/Northwest), doing whatever they had to do, to keep their planes full and stay alive. The situation is now relatively stable, and therefore, these base prices (not sale prices) are likely to remain high. The exceptions will be targeted airfare sales, like the recent spate of holiday sales, and we may see some weakening of prices for business travelers who pay top dollar for their last minute airfares.
What about the price of fuel coming down? Well, it came down, but it didn't help passengers much. Airlines have long felt that ticket prices were too low, and as long as they continue to cut seats to keep planes full, the airlines will remain on the winning side of the supply and demand curve.
We will continue to see some fuel surcharges on our tickets (to help the airlines recoup their losses and compete with international airlines). Of course, lower fuel prices will always help the airlines, and act as a kind of financial padding, should demand continue to soften.
There was a rush to make more seats available in the past few years on these higher-profit flights. But then we saw the Euro drop as the financial crisis hit Europe, so some of these newly available seats are now flying empty, which means they are being discounted.
Then you have to factor in fuel price drops. These price drops can more dramatically change the cost structure of international flights with their newer, more fuel efficient aircraft, and that adds up to good news for passengers.