A New President and Fixing the Airlines

Nov. 5, 2008 — -- By the time you read this, we should have elected a new president. I don't envy him.

So much to do, not to mention having to do it in the current toxic economic environment. Which leads me -- as always -- to the airline industry and our hopes and fears for it. Here's what I've been thinking:

What a difference a year makes. From July 2007 to July 2008. If I had a wish list for our new commander-in-chief, I think I'd say, "Sir, can we take the airlines back to 2007?"

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Consider this: early last year, U.S. airlines had finally awoken from their coma and were happily stringing together a few profitable quarters and putting those annoying bankruptcies in their rearview mirrors.

And passengers for the most part were happy with the price of airline tickets, with those occasional $99 coast-to-coast seats to liven things up. Checked bag fees and fuel surcharges? Why, those could only be bizarre figments of a very demented imagination.

The biggest complaint from airline financial analysts was that the airlines couldn't hike tickets high enough to suit shareholders. To address this, legacy airlines began slowly cutting back on domestic seats (fewer seats means higher prices) while adding seats to lucrative international routes.

And all was well in the air travel universe of 2007.

Until those crazy oil prices started going out of control. That was the first shoe to drop in late spring of last year.

What was once in the top two or three of the top-line expenses had suddenly zoomed to number one. Well, for everyone except the High Priest of Hedging: Southwest. All the other airline execs were scrambling through their medicine cabinets for antacids while oil shattered price records as it soared from the low $60's to nearly $150 a barrel by July 4, 2008.

And suddenly, fuel surcharges were all the rage: in July of 2007, domestic surcharges (when you could find them) averaged about $20 a ticket, but by this summer, we saw surcharges as high as $170 a return ticket. Transoceanic international flights were even worse: Fuel surcharges jumped from about $100 a ticket to $300 and even $400.

Higher Airline Fees

That same year saw the introduction of fees -- for bags, for redeeming frequent flyer miles, for changing tickets -- fees that were temporary (in theory), but have yet to go away.

And at the same time, ticket prices rose by 20 percent to 40 percent -- with the highest prices in the smaller towns. All in all, during that July '07 to July '08 time period we saw 33 attempted price hikes -- and most of them were decidedly successful.

But, thanks to the energy crisis, those hikes weren't enough -- which was the catalyst for the start of the most massive seat cutback in domestic aviation history. Hundreds of thousands of seats -- poof! -- gone, just like that.

And passengers kept flying.

But then, why not? Beginning in July of this year, the energy crisis started to fade away -- oil prices have now dropped to July '07 levels -- and people are beginning to whisper that the energy crisis "is over."

Funny thing about that energy crisis -- it may be over, but you'd never know it from the fuel surcharges. Or the ticket prices. Another funny thing: People aren't taking to the skies like they used to. Airlines still swing their axes to chop employees, as well as seats, from flights, but recently some empty spaces have been spotted in more than a few cabins as businesses prepare for the worst.

It's unfortunate, any way you look at it, but here's what's happened: the airlines no sooner got "done" with one crisis -- energy -- when they were slapped in the face with a potentially worse one: international economic disaster.

Checked Bag Fees

So of course those fees and surcharges are going to stay right where the airlines want them -- on your ticket and at check-in.

But there are little glimmers of hope for passengers, here and there. For example, the dollar is stronger against European currencies -- terrific news for anyone who's dropped a fortune on a London hotel room. As for the rest of us, notice how all the airlines recently came out with significant domestic airfare sales this holiday season? It wasn't looking good for sales of any kind a few short months ago.

Now, you could look at the situation as "glass half-empty," meaning as soon as this global financial mess is cleaned up, there will be another crisis to take its place. Or, the half-full angle: Maybe, if we're really lucky -- we can go back to the future -- of early 2007.

Let me just add: Anything you can do to help out passengers, like fixing air traffic control sooner and putting in a flat domestic airline ticket sales tax, Mr. President-Elect, would be much appreciated.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Rick Seaney is one of the country's leading experts on airfare, giving interviews and analysis to news organizations, including ABC News, The New York Times, The Wall Street Journal, Reuters, The Associated Press and Bloomberg. His Web site FareCompare.com offers consumers free, new-generation software, combined with expert insider tips to find the best airline ticket deal.