Airfares in the United Kingdom Surge At A Record Pace

It looks like American flyers are not the only ones paying higher fares. Across the Atlantic, air passengers in the United Kingdom paid 16.1% more to fly in August than in July, a record seasonal increase. This dour news was part of the U.K.’s latest inflation report that showed consumer price inflation above the government’s 3% limit for a sixth month in a row. The core rate of inflation was up 2.8%, higher than the 2.5% consensus forecast. Maybe we can export some of our deflationary fears to help out the cause.

See “U.K. Inflation Unexpectedly Exceeds 3% on Air Fares, Food” for more details.


Airfares Near Pre-Recession Levels

Airlines are making money again thanks to the pricing power that has come from an economic recovery and reductions in overall capacity. The improved pricing has allowed airlines to charge for an array of services that were once free. In addition, domestic leisure airfares have increased 20% year-over-year from the second quarter, international fares are up 30%, and business travelers are paying 12% more. Another metric, the price paid per passenger per mile, is only 3.9% off the 15.56 cents from July, 2008 which was the highest for the past 10 years.

All these price increases have translated into seven straight months of revenue growth and major airlines are generating impressive profits. For example, Delta made $467M last quarter; its best quarterly showing in a decade. These results mark a sharp rebound from the decade-low prices at the depths of the recession and from the extremely high oil prices that squeezed airlines before that.

For more details see “After Bargains of Recession, Air Fares Soar” in the New York Times (September 5, 2010).

Phone companies jack up rates for basic phone service

David Lazarus of the L.A. Times:
AT&T customers saw their monthly rate for basic residential phone service jump 22% this month to $16.45. The increase followed a 23% rate hike last year.

And you know what? That’s the good news.

The bad news is that, beginning in January 2011, AT&T and other phone companies will be permitted to jack up basic rates as much as they want — no regulatory limits will apply.

Meanwhile, Verizon raised the price it charges for basic residential service last year to $19.91 monthly from $17.66, Lazarus reports.

Cell phone, cell phone plan prices are dropping

Here at Inflation Watch, we spend most of our time talking about rising prices, but there are some sectors of the economy in which prices are falling. Historically, one of those sectors has been technology (e.g. computers).  Thus, it is not surprising that cell phones and cell phone plans are becoming more affordable.  Wal-Mart now offers a plan with unlimited minutes for just $45 per month. Larger carriers are lowering their prices.

This device is not a phone, but offers free e-mail service for life for less than $300. This is a pretty amazing deal, especially if (like me) you prefer e-mail to talking on the phone.

24/7 Wall Street says cell phone prices may drop much further:

Imagine if Google wanted the mobile web ad market so much that it just gave the phones away for ad-maximization.  Or imagine if things got so tight that Steve Jobs started giving away iPhones for free, if you buy a Mac.  Those are far from likely, but something in the middle might not be.  That is why they call price wars a race to zero.

Delta hikes baggage fees. Again.

Because, you know, everyone loooves baggage fees:

The higher fees take effect Tuesday for Delta passengers who booked their flights Jan. 5 or later and are checking bags on domestic flights. For those who pay the baggage fees when they check in online, the fees will be $23 for the first checked bag and $32 for the second checked bag. Those who pay the baggage fees at the airport ticket counter, kiosk or curbside will pay $25 for the first checked bag and $35 for the second.

Verizon Wireless doubles early termination fee, says its high-end phones are “getting more expensive”


With a whole new line of smart phones coming onto the market, Verizon Wireless said that starting November 15 it is doubling to $350 the penalty fees for subscribers who leave their contracts early.

James Gerace, a spokesman for Verizon Wireless, the nation’s largest cell phone service, said the fees are for subscribers in one- and two-year contracts on an “advanced device” and that those fees will be pro-rated $10 a month. That means, if you’ve made it halfway through your two-year contract, the $350 penalty will be reduced $120 to $230.

Gerace said the company decided to raise fees because its highest-end phones and small wireless laptops are getting more expensive.

AT&T to increase landline rates by more than 20 percent

San Jose Mercury News:

For the second time in two years, AT&T is raising local landline phone rates by more than 20 percent. The phone giant plans to start informing customers next week that charges for basic phone service will jump from $13.50 a month to $16.45 on Jan. 2. AT&T also plans to raise the rate for its LifeLine service for low-income customers, by 73 cents to $6.84 a month. The moves will affect half of the company’s 6.5 million phone customers in the state. Those who subscribe to newer, bundled service packages generally won’t be affected.

Airlines hike fares… and no end in sight for annoying fees

Reuters reports that major airlines  are raising their fares this week:

An industrywide increase of domestic air fares appears well on its way of becoming the fourth hike of 2009, a top fare analyst said on Wednesday.  The fare increase, initiated on Tuesday by AMR Corp’s American Airlines, represents a boost in round-trip ticket prices by as much as $16 for an unusually large number of U.S. city pairs, said Rick Seaney, Chief Executive of The increase saw matches from Continental Airlines, Southwest Airlines , Delta Air Lines, UAL Corp’s United Airlines and US Airways Group, Seaney said in a research note.

This fare hike comes on the heels of all kinds of annoying new fees and surcharges. Travel columnist Ed Perkins of the Chicago Tribune notes:

The latest outrage to hit the travel headlines is from British Airways: fees for seat assignments more than 24 hours in advance of departure…. By now you’re accustomed to paying extra on most lines for meals, snacks, and even soft drinks; for checked baggage, for pillows and blankets, to make a reservation by phone, for a paper ticket, and more…. Can airlines charge us for anything else? The head of Ryanair was quoted last year about considering charging for the use of the onboard lavatory, but even the top Ryanair-watchers aren’t sure whether he was serious.