The airline business is tough. Weather delays, volatile jet-fuel prices and impatient passengers all wanting a bargain can play havoc with an airline's carefully crafted business model. And in the new week, the federal government will slap on higher security fees.
It has been a very profitable year to be an airline shareholder. The stocks of legacy carriers like American, Delta and United Continental have risen at least three times more than the overall S&P 500-stock index. Shares of low-cost carriers such as Southwest and Spirit have gained almost 50 percent since January.
Many have done it by tightly controlling the number of seats available. That allows the carriers to fly planes with fewer empty seats, giving them more pricing power. Airfares have been increasing, thanks to less competition. At the same time, the carriers have become more sophisticated (some would say villainous) with baggage fees, seat charges, boarding costs, and so on.
Beginning Monday, pas
sengers will see higher ticket taxes, but airlines won't necessarily see higher profits. The Transportation Security Administration's security fee goes up from a $2.50 per leg of a one-way trip to a flat $5.60. And if you have a layover of more than four hours, you'll pay another $5.60 even though you haven't even unpacked. We may be talking dollars and cents for fliers, but it adds up to millions of dollars in additional fees the industry must collect.
The higher fees will be tacked on to airfares that already have been climbing. Airline shareholders should be weary; the higher fees could bring turbulence to what's otherwise been a smooth flight.
Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter @HudsonsView.