Apparently the nation’s airlines have decided that their best strategy is to add yet another fee for this summer.  This time it’s a peak travel surcharge.  See the CNN story HERE.  The question is, will it work?  Would you pay from $10 to $30 more over the published fare for a ticket this summer?

I wouldn’t.  Quick research on my favorite routes show the fares are already climbing rapidly and in two cases have nearly doubled for the least expensive ticket.  The economy hasn’t recovered, people are not earning more and unemployment is still exceptionally high.   I think air fares are very inelastic in price for consumers this summer if only for the leisure travelers. 

Capacity is still way down and clearly the airlines think they can earn more and not lose traffic.  Maybe they’re right too.  But I like to do a bit of content analysis on for sale ads from time to time to gauge where we might be when it comes to disposable income.  If you take a look at the ads online someplace such as Craigslist and see what’s being sold and at what price, you can often get a reasonably good feel for whether or not people feel they have enough income for luxuries.

Right now, I see a lot of firesales on goods.  Nearly new televisions, computers, appliances, etc. tell me that people are still trying to make do or survive.  I suspect a lot of people will defer travel for their vacations this summer in the end.  Advance bookings were strong in March and April, yes.  Prices were also exceptionally low in March and April.  A round trip flight from DFW to MKE in late July has climbed more than 20% in price already and that is on a hyper-competitive route. 

Will the airlines “stick together” on these surcharges?  I think someone might break in a week or two.  Unlike most fees, these surcharges are showing up in booking engines and it is quite possible one or more airlines might “break” from the pack as soon as sales soften.   In addition, while the legacies are doing this, the LCC’s aren’t showing many signs of adopting it yet except Airtran who did choose to add a  “flate rate” surcharge of $10 for 25 days in the period marked from June 10 to August 22.  Once again, Airtran acts a bit smarter.

Time will tell but I don’t see us enjoying a summer where all economic signs point to consumer confidence.  As I write this, the stock markets have had a big sell off over fears of volatility in Europe with respect to weak economies and a weakening Euro.   Unemployment rates haven’t made a real reversal in direction.  Gasoline prices are a bit up and food prices are too.  It’s doesn’t take much to reduce the disposable income of an average household and uncertainty means most will play it safe rather than just “accepting” yet another fare hike.

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