Airport Inflation Soaring Higher

The Labor Department recently reported that the cost of living in the United States increased in February by the most in 10 months.  Compared to a year ago, consumer prices jumped 2.9 percent.  However, prices at the airport are increasing at an even faster rate.

According to FareCompare, air travelers should expect more sticker shocks.  Last year, airfare prices increased about 17 percent.  Since January 2012, prices have already increased about 4 percent as jet fuel prices, which are a function of crude and refinery costs, continue to rise.  In 2011, the nation’s airlines spent about $51 billion in fuel costs, compared to $33 billion in 2005.  Companies such as United Continental Holdings Inc. (NYSE:UAL), Delta Air Lines Inc. (NYSE:DAL) and US Airways Group Inc. (NYSE:LCC) have all raised prices this year.

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Ben Baldanza, president and chief executive officer at Spirit Airlines Inc. (NASDAQ:SAVE), recently said, “We do expect pressure on ticket prices as energy prices stay really high and volatile.”  In order to help cope with rising costs, he explained, “What we’re doing at Spirit is we fly a very young, fuel efficient seat.  We also put more seats on our airline.  Just like Apple (NASDAQ:AAPL) gets a better picture when they put more pixels, we get lower prices wen we put more seats on the plane.”  Spirit is one of the best performing stocks in the airline industry, gaining about 25 percent year-to-date.

Laura Wright, Southwest Airlines (NYSE:LUV) chief financial officer, announced last week that the company does not expect to earn a profit in the first quarter due to high fuel costs.  “For March, bookings remain good but we are cautious,” she said during a conference.

In addition to rising airfares, passengers looking for a more pleasant security screening process will also have to pay more.  The Transportation Security Administration is launching a new program called “Precheck,” which allows passengers to bypass full-body scans, pat-downs and liquid regulations for $100.  The WSJ reports, “The process, now at two airlines and nine airports, is much like how screenings worked before the September 11 attacks.  To qualify, frequent fliers must meet undisclosed TSA criteria and get invited in by the airlines.”  By the end of the year, the program is expected to be in place at 35 airports and six airlines.  Currently, the program is only available at American and Delta.

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com