Why Higher Airfares Could Be on the Horizon

Anna Williams
Posted

airline merger‘Tis the season for booking travel for the upcoming holidays—so you don’t need to be reminded that a hefty airline ticket can put a damper on your budget (not to mention your holiday spirit).

Unfortunately, news that the federal government is allowing American Airlines and U.S. Airways to merge into the world’s largest airline could mean fare hikes are ahead.

We all know from Econ 101 that less competition usually spells bad news for consumers. And historically, that’s proven to be the case: The Wall Street Journal reported that after the merger of United Airlines and Continental Airlines in 2010, United’s fares went up by 57% over a three-year period along the well-traveled Houston-to-Chicago route.

So it’s no surprise that this latest merger has many travelers on edge. “People are concerned about ticket prices, and they should be,” Rick Seaney, chief executive of FareCompare.com told MarketWatch. “We had eight mega-airlines five years ago. Now we’re down to four, and in the long run, that will hurt ticket prices.” What’s more, ancillary fees (extra charges such as baggage fees that creep into your bill) are also expected to climb—not surprising, considering those charges are a boon to airlines’ revenue.

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But there’s no need to start canceling any upcoming travel plans. It could take months—if not years—for the merger to start having an effect on daily travel. On top of that, there might actually be a budget-friendly upside to this news. As part of the requirements from the Justice Department, the airlines will have to give up slots at major airports to low-cost competitors. That’ll mean a stronger presence for smaller carriers such as JetBlue and Southwest at places like Washington, D.C.’s Reagan National Airport and New York’s LaGuardia.

“This agreement has the potential to shift the landscape of the airline industry,” Attorney General Eric Holder said when the merger was announced. “By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports, this settlement ensures airline passengers will see more competition on non-stop and connecting routes throughout the country.”

The jury may still be out on just how all this will affect ticket prices in the future, but you can still try to get the best deal today. Make sure you know these six money-saving airfare secrets and the best budget-friendly day to book tickets for every occasion.