Steep increases in fuel prices are having a ripple effect throughout the economy, and airlines are no exception. James Higgins, an analyst for Soleil-Solebury, noted the industry would cut capacity by 9 percent in 2008. In addition, airlines will raise prices, eliminate flight to dozens of discount destinations and add service fees to cut their losses.
Airlines are restructuring routes so that planes fly at near capacity. As a result service to many cities will be severely curtailed. Analysts say Florida will be particularly hard hit by the cuts. Delta, Southwest, and United Airlines have all recently increased fares by $5 to $40. American Airlines now charges a $15 fee for travelers’ first checked bag.
Philip Baggaley, a fixed-income analyst at Standard & Poor’s, noted, “I think we’re going to see fare increases. The question is how high they’ll go.”
