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Frequent Fliers: What to Expect this Year

You may have seen the reports of record airline earnings for yet another financial quarter. It's been a great couple of months for virtually every airline. But for business travelers, flying has been expensive and filled with aggravation--and it's only going to get worse this year.

My predictions for 2011:

More Fees, Maybe Even Pay Toilets

The airlines have hit upon a double whammy when it comes to profits here, and for one reason they'd rather not discuss: taxes. When you buy an airline ticket, a substantial portion of that airfare is for taxes (especially on international flights).

But ancillary fees--for checked baggage, in-flight meals, upgrades to first class and other non-ticket expenses--is mostly profit for the airline. As a result, the airlines are quietly exploring every conceivable way to invent additional fees that are not related to the actual ticket. We've already seen the unbundling of prices on everything from food to blankets to carry-on bags (on one airline, at least). Next up, Europe's Ryanair is even considering installing pay toilets on its planes.

As long as fuel prices don't soar, airlines will publish relatively modest fare increases in the first two quarters of 2011, but they'll concentrate on these extra fees.

International Fares Relatively Inexpensive, For Now

Because of deregulation in the United States, if an airline no longer wants to fly to Topeka, it can pull out of the market, or severely reduce service, without any penalty. So therefore, capacity can be slashed with no repercussions to the airline. Fewer seats mean higher fares and passengers being packed in like sardines.

International flights are another issue altogether due to bilateral agreements between the U.S. and foreign countries. If an airline wanted to end or seriously curtail service between New York and Paris tomorrow, it could violate the bilateral agreement and as a result that airline could lose the right to fly that route entirely.

As a result, about the only place where excess capacity still exists is on overseas routes--and seasonally. Right now, a New York to London round-trip is as low as $600 for that seven-hour flight. By comparison, the New York to Washington shuttle on U.S. Airways is often $296 each way for a 38-minute flight.

Business travelers likely will see huge seasonal discounts in business class to to Europe over the North Atlantic (still too many carriers competing for too few passengers), but that won't last forever.

New Airline Alliances Are Coming, Along with Higher Fares

Because of the new, stronger oneworld alliance between American, British Airways and Iberia, the airlines will combine on many routes to essentially code share one flight when there used to be two. Result: capacity reductions, and as we've already experienced in the U.S., higher fares.

So, for the moment, look for alternatives across the Atlantic--the British Airways flight to London City Airport--or Open Skies, the BA subsidiary (and a great flight) between Washington or Newark and Paris' Orly Airport.

In coming weeks, I'll share with you some "secret" flights between routes that you didn't know were flown by certain airlines between New York and Munich, Between Dusseldorf and Chicago, between Los Angeles and Sao Paolo, and many others. Not only are those flights usually not full, but they often offer better service, and lower fares.

You've heard my predictions. What predictions do you have for the airline industry this year?

Image courtesy of Flickr user BriYYZ.

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