After the Storm, Airlines Hike Ticket Prices

Dec. 30, 2010— -- After a week of blizzard-related delays that left tens of thousands of passengers stranded -- many who now won't make it home until the new year -- the largest airlines are now raising airfares.

This fare hike comes as passengers are sleeping on airport floors and waiting hours to get through to customer service representatives on clogged phone lines.

"You would have thought they would have waited until the mess in the Northeast cleared up. But that's not the way the airlines' revenue management departments work," explained Graeme Wallace, chief technology officer for FareCompare.com, which first announced the hike. "They've been tasked to make as money as they can. They see an opportunity and are going with it."

The $20 roundtrip airfare hike was initiated by American Airlines on Monday, according to FareCompare, and has now been matched by United, Continental, Delta, US Airways and Alaska Airlines. Southwest, Jet Blue, Airtran and Frontier have not yet raised their prices.

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Airlines believe they can increase fares given the basic rules of supply and demand. During the recession, they cut flights to adjust to fewer businessmen and vacationers taking to the skies. Now those travelers are coming back, but there are still fewer seats available, allowing the airlines to command higher prices.

Wallace speculated that American might have initiated the price hike to recoup losses -- real or perceived -- from its battle with booking sites Expedia and Orbitz or in reaction to rising oil prices.

Hours on Hold

"The airlines have cut back on customer service, mostly phone center staff," said Henry Harteveldt, an airline analyst at Forrester Research. "On a per-passenger basis, airlines generally have fewer people now at the airport than they did five or 10 years ago, because there is more self-service technology available to passengers -- online, mobile and kiosk check-in, for example."

Many travelers have complained that it's been difficult to obtain even basic information from airlines.

Tommy Mokhtari was stranded at New York's John F. Kennedy International Airport as he tried to get home to Dubai.

"I waited four hours in the queue just to speak to someone — just to get the news that I have to wait a few more days," Mokhtari told the Associated Press. "They really need to have a backup plan.

However, severe events such as this week's storm overwhelm these systems and sometimes the only way to get rebooked is through an agent.

In the last decade, American, Continental, Delta, JetBlue, Southwest, United and US Airways have cut more than 156,000 combined, according to data from the Bureau of Transportation Statistics.

Harteveldt said passengers do need airlines to be profitable, and this fare hike is probably in response to stronger demand for flights and rising oil prices. But the timing, he said, "couldn't be worse."

Ray Neidl, an airline specialist with the Maxim Group, has been generally upbeat about the airline's prospects for the coming year. He said this storm could pull a few companies out of profitability for the fourth quarter. He noted that the fare increases were announced before the storm but didn't hit the systems until after it.

The delays were compounded by slow airport clearing operations and strong weeks even after the snow was long gone.

"I think operationally, they did everything they could," Neidl said.

Since planes today are fuller than ever before, the airlines were left, he said, with "fewer options for rerouting people."

Those struggling to get through on the phone did have some luck with Delta and their Twitter feed. That's right, the Atlanta-based airline actually have nine staff members dedicated to helping passengers via its @DeltaAssist Twitter handle.

Twitter to the Rescue

Delta does think this effort is detracting from its other customer service efforts -- the airline is one of the few in the middle of a hiring push now. Elliott said the airline is just trying to react to all the different ways customers try to interact.

"We have had a tremendous amount of success, but we do not have all the answers," she said. "Social media is teaching us something new every day and we are doing our best to tap into its power, while taking the lessons learned and advances to improve our efforts."