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Wednesday, October 1, 2003 Posted: 1711 GMT ( 1:11 AM HKT)
Air Transportation
CHICAGO, Illinois (Reuters) -- U.S. airlines have had a four-month reprieve from collecting security fees on behalf of the U.S. government, but the hiatus ends Wednesday and passengers could see higher airfares.
In April, lawmakers in Washington agreed to reimburse airlines $2.3 billion in security costs the carriers had paid the government since February 2002, mostly to pay for airport security improvements in the wake of the September 11, 2001, attacks.
The attacks using four hijacked planes threw the airline industry into its worst financial crisis ever, which was compounded this year by the U.S.-led invasion of Iraq.
The government suspended the fee -- $2.50 for each leg of a trip, up to $10 per round-trip ticket -- collected by airlines between June 1 and September 30, 2003, to save the airlines an additional $700 million.
Consumers saw no discernible effect, however, as airlines kept ticket prices steady and simply pocketed the difference, according to J.P. Morgan analyst Jamie Baker. He estimated it added $350 million to airlines' bottom line.
But on October 1, with the beginning of the government's new fiscal year, the suspension will be over.
"Unless carriers roll back fares by a like amount (now), most consumers will witness up to a $10 increase effective tomorrow," Baker said on Tuesday.
His advice to passengers searching for tickets on the eve of the fee's return: "Buy 'em now."
Airlines on the upswing
Most major U.S. airlines are still under financial stress. But starting in May, unit revenue, or the amount of money taken in per available seat mile, rose steadily for four months straight, boosted in part by travel during the busy summer vacation months. Available seat miles represent how many seats an airline flies.
In August, unit revenue was up 9 percent after rising 8 percent in July -- both healthy increases that helped spur some optimism on Wall Street. Carriers' stock prices have soared, with the American Stock Exchange's Airline Index up 134 percent since its March 11 low, according to Credit Suisse First Boston analyst Jim Higgins.
Higgins estimates that the major U.S. carriers -- excluding US Airways Group and bankrupt United Airlines' parent UAL Corp. -- will have a third-quarter operating loss of $100 million, well off the $1.15 billion loss posted in the year-ago quarter.
But as the winter travel season approaches, airlines are far from healthy. Most major carriers except for Southwest Airlines Co. and perhaps Continental Airlines Inc. are still in the red.
Last week, Delta Air Lines Inc. launched a fall and winter fare sale to entice travelers to the skies after summer vacations ended. Many carriers matched the sale fares.
Air Transportation
CHICAGO, Illinois (Reuters) -- U.S. airlines have had a four-month reprieve from collecting security fees on behalf of the U.S. government, but the hiatus ends Wednesday and passengers could see higher airfares.
In April, lawmakers in Washington agreed to reimburse airlines $2.3 billion in security costs the carriers had paid the government since February 2002, mostly to pay for airport security improvements in the wake of the September 11, 2001, attacks.
The attacks using four hijacked planes threw the airline industry into its worst financial crisis ever, which was compounded this year by the U.S.-led invasion of Iraq.
The government suspended the fee -- $2.50 for each leg of a trip, up to $10 per round-trip ticket -- collected by airlines between June 1 and September 30, 2003, to save the airlines an additional $700 million.
Consumers saw no discernible effect, however, as airlines kept ticket prices steady and simply pocketed the difference, according to J.P. Morgan analyst Jamie Baker. He estimated it added $350 million to airlines' bottom line.
But on October 1, with the beginning of the government's new fiscal year, the suspension will be over.
"Unless carriers roll back fares by a like amount (now), most consumers will witness up to a $10 increase effective tomorrow," Baker said on Tuesday.
His advice to passengers searching for tickets on the eve of the fee's return: "Buy 'em now."
Airlines on the upswing
Most major U.S. airlines are still under financial stress. But starting in May, unit revenue, or the amount of money taken in per available seat mile, rose steadily for four months straight, boosted in part by travel during the busy summer vacation months. Available seat miles represent how many seats an airline flies.
In August, unit revenue was up 9 percent after rising 8 percent in July -- both healthy increases that helped spur some optimism on Wall Street. Carriers' stock prices have soared, with the American Stock Exchange's Airline Index up 134 percent since its March 11 low, according to Credit Suisse First Boston analyst Jim Higgins.
Higgins estimates that the major U.S. carriers -- excluding US Airways Group and bankrupt United Airlines' parent UAL Corp. -- will have a third-quarter operating loss of $100 million, well off the $1.15 billion loss posted in the year-ago quarter.
But as the winter travel season approaches, airlines are far from healthy. Most major carriers except for Southwest Airlines Co. and perhaps Continental Airlines Inc. are still in the red.
Last week, Delta Air Lines Inc. launched a fall and winter fare sale to entice travelers to the skies after summer vacations ended. Many carriers matched the sale fares.
