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Airfare Wars

Airline tickets and money held in hand, drawing
If you're yearning to get out of town, maybe to go to someplace warm, now is a great time to travel.

The airlines are currently offering some major price breaks on fares. Vera Gibbons, from Kiplinger's Personal Finance Magazine, stopped by The Saturday Early Show with a look at some of the best deals.

Recently, newspapers have been filled with "New Year Fare Sales" on major airlines. The following are a sample of the amazing prices:

New York - Orlando, about $182
Chicago - Miami, about $213
Los Angeles - Ft. Lauderdale, about $198
Washington, D.C. - San Juan, about $224
Boston - Bahamas, about $253

Most of these sale fares must be purchased by next week, and flights must be taken between now and May.

There are also great rates to Europe. Flights from major U.S. cities to Europe are in the $300 to $500 range; some of the best deals are to London.

New York - London, about $354
Houston - Frankfurt, about $441
Dallas - Rome, about $524
Los Angeles - Paris, about $524

Although these price wars coincide with the recent orange alert, the renewed terror threat and new security measures are not affecting prices, according to industry expert Tom Parsons. He says foreign airlines and passengers are the ones finding the new procedures inconvenient. He also believes that everyone wants to be safe in the air, and will not quit flying because of the inconvenience caused by heightened security.

But according to the International Air Transport Association, an 8 percent gain in air traffic this year may be jeopardized by a long spell of canceled flights. Gibbons says travelers ultimately could benefit if a growing number of international flights are canceled. That's because some carriers, particularly international airlines, could be forced to slash overseas fares to boost traffic. Many U.S. airlines in turn might have to match the lower fares to remain competitive on those routes.

If you do happen to have a flight canceled due to a security threat, Gibbons says you are entitled to a refund of the unused portion of your ticket -- assuming that the airline does not provide an alternate flight within three hours of your original departure time. (The time minimum can vary, depending on the route or the airline).

There are three big factors behind the current low prices.

  • Slow Travel Time: This time of year is traditionally a slow period for airlines. People have just finished their holiday travels, and are taking some time off before heading out for spring break in March. Gibbons says the airlines are hoping that cheap fares might lure more passengers.

  • Lingering Effects of 9/11: Airlines are still suffering from the steep drop in travel following the 9/11 tragedy. An airline consulting firm recently reported that the six largest carriers have shrunk their domestic operations by 19 percent since then, resulting in annual losses of about $12 billion. Airlines had their lowest revenue in history in 2003. Gibbons says while airlines want to increase prices, they are still looking to fill their planes.

  • Discount Airline Competition: Gibbons says when small, low-cost airlines began to pop up, the bigger carriers aggressively tried to price them out of business. Now, the discount airlines are running the show. Low-cost carriers may have just a fraction of the number of flights of larger airlines, but their rock-bottom fares are forcing the major carriers to match prices or risk losing passengers. Gibbons says in their current financial states, the large airlines don't want to take that risk.

    Gibbons says to enjoy the cheap fares now, because they are not going to last. Experts predict prices will start to rise around spring break and keep rising into the summer. And, she says, as the economy improves, people will have more money to spend and will be more willing to part with it. Also, experts believe that more Americans will feel comfortable taking vacations this summer, because the job market is improving and people are not quite as concerned about losing their jobs.

    Gibbons explains the industry operates on supply and demand. When demand goes up, prices follow. Barring the threat of war, another SARS epidemic or mad cow disease, travel demand is expected to rise this summer.