Summer Travel Up Despite High Air Fares and Gas Prices

According to Bloomberg News, passenger traffic in June rose by 5 percent for 17 U.S. airlines over the same month last year.

At Kansas City International Airport, 3-year-old Austin Coffman and mother Erin Coffman recently welcomed Austins grandmother, Susan Petry of Las Vegas, for a nine-day visit. The Coffmans are from Ottawa, Kan. Many Americans are proceeding with their summer travel plans despite higher costs for airline tickets and for gasoline.

Air fares and gasoline prices are up, but thats not stopping summer travel, which is on track for a record season.

The travel industry has been hoping that travel will be up sharply this year. With seven weeks left in the traditional summer vacation, confidence in that prediction is building. The season kicked off with a strong Memorial Day weekend, and AAA estimated that the number of travelers over the Fourth of July weekend set a record for a three-day holiday weekend.

Airlines also are reporting heavy loads. Southwest Airlines, for example, reported an 8 percent increase in passenger traffic in June compared with the same month last year. And a key indicator for gasoline sales, from the federal Energy Information Administration, shows that demand for the fuel is up more than 2 percent so far this summer.

Hotels and motels also have seen increasing demand. According to the Travel Industry Association of America, demand for rooms was up 3.4 percent through May, compared with a year ago, and revenue was up more than 8 percent.

Everything is really cooking, said Mike Right, spokesman for AAA Auto Club of Missouri.

The upswing in travel comes even as gasoline prices hover at record levels when not adjusted for inflation. The national average for regular unleaded gas was $2.30 on Thursday, up 38 cents a gallon from a year ago. And airfares are reversing a nearly four-year decline in prices as airlines recover more of their fuel costs. The Bureau of Labor Statistics said airfares in June were the highest since July 2001, the summer before the Sept. 11 terrorist attacks.

The high costs are not going unnoticed, but consumers apparently are shaking them off and proceeding with their vacations.

Charles Bunny of Kansas City is driving more than 900 miles to Mobile Bay, Ala., despite the extra cost for gas. Im traveling, but I would be happier if gas didnt cost as much, he said.

Those mixed feelings are mirrored by those trying to determine whether the increased vacation activity signals an improving economy.

Some economists say the travel reflects better wages, an improved job market and home mortgage refinancing, all of which would give people more money to spend. But there is also travel industry research indicating that people are simply determined to have a vacation and hope to find other ways to cut vacation costs to offset costlier gasoline, air fares and motel rooms.

A survey by the Travel Industry Association of America found that people hoped to spend an average of $1,019 on their longest leisure trip this summer 7 percent less than last summer. On average they also plan to stay seven nights away from home, down about half a night from last year.

Association research also found that most people make vacation plans and then consider budgeting. Most do not stick to a strict trip budget, and more than 30 percent of leisure trips are taken without budgeting.

Another reason that travelers are pushing ahead is that higher gas expenses are not a big part of vacation costs. The Energy Information Administration calculates that a 500-mile trip in a car that gets 25 miles a gallon costs about $10 more this summer than last year, and that the increase in gasoline prices does not add much to the cost of a typical vacation trip.

Total gasoline costs for a 1,000-mile trip are about $90 for a car that gets 25 miles per gallon. By comparison, AAA said that a family of four would spend an average of $247 per day for food and lodging. The cheapest state is Nebraska, which costs $184 for lodging and food per day. The most expensive state is Hawaii at $517.

As prices at the pump have climbed, so have the costs of flying. Airlines have raised fares on various routes several times this year in part to recover rising prices for jet fuel.

But that has not stopped the public from taking to the skies. In June, passenger traffic rose by 5 percent for 17 U.S. airlines, compared with the same month last year, according to statistics compiled by Bloomberg News. The June load factor, the percentage of seats filled with paying passengers, was 83.1 percent for all airlines, up from 81.9 percent a year earlier.

The passenger traffic percentage gains for the first six months of 2005 are even greater than Junes, according to Bloomberg News

Prices are higher, but so is the passenger traffic. Thats an indication that consumers are digesting the higher fares, said Bob Harrell, president of Harrell Associates, a New York-based travel consulting firm.

The company calculates the cheapest leisure fare on a four-week running average for nearly 300 routes offered by the major carriers. That average price was 14 percent higher in the first week of July than the same time last year.

I think its fair to say leisure fares are up 10 to 15 percent through the spring and early summer over last year, Harrell said.

Terry Trippler, an airline expert at cheapseats.com, estimates that most round-trip tickets cost from $40 to $50 more than last year.

Some people will drop off because of the higher prices, Trippler said. But the airlines are picking up travelers like couples who decide not to drive their Navigator from Kansas City to Los Angeles because of the higher gas prices. Even though air fares are going up, its cheaper to fly than to drive that far with the gas and motels.

Trippler expects airfares to continue rising through the rest of this year and into 2006, after more than three years of extremely low ticket prices.

My advice is if you see a fare you like now for travel during Thanksgiving or Christmas, buy it, he said. I would bet the rent that it will be higher later in the year.

Kathy Sudeikis, vice president of corporate relations at All About Travel in Mission, said some consumers were already making their travel plans for spring break next year.

People who havent planned yet for this summer are kicking themselves, but its not stopping them from going, she said. There are occasions like family reunions and weddings in which the dollar amount for tickets doesnt really change peoples minds about attending.

The higher fares and full planes are good news for the airline industry, which has lost billions of dollars in the past three years. American Airlines and Continental Airlines this week reported quarterly profits. For American, the worlds largest carrier and the second-busiest at Kansas City International Airport with 21 departures daily, it was its first quarterly profit without special charges in more than four years. Still, the airlines could lose money for the year.

There have been some fare increases, but they have not offset the dramatic rise in fuel costs, said Tim Wagner, a spokesman for American. The headwind of historically high fuel costs and historically low fares is still not adding up to a healthy environment for the airlines.

The travel industry expects the fare increases to be sustainable, at least as long as the economy does not falter. For now it can count on travelers like Kim Warren of Kansas City, who is taking a three-week trip to the East Coast on which she will fly and drive.

Are costs up? Yes, she says, including hotel costs. But shes going anyway.

I cant consider that a big concern, she said.

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