Vacations Will Get Even More Expensive

The airline industry is enjoying the benefits of consolidation although gas prices continue to skyrocket. So far in 2012, there have been three fare hikes even though there were 11 increases so far between the years of 2010 and 2011. Crude oil has increased nearly 30% over the past six months. The increase in oil prices has been leading to less planes in the air and furthermore, more crowded seats. United has filled nearly 80.6% of its overall seats and all these costs are just being transferred to the customer. Some predict that airlines will try three to four more fare hikes before the summer travel season with sales only to help fill during the mid-peak times. Besides those that must fly due to business, I believe this summer will have sharp declines in flight revenue because the average four person family will have a hard time paying for such a flight. When the cheapest round-trip on average is $362 and this is in March, by the time summer comes around people could be finding the cheapest tickets being at least $400 per person. More families might resort to driving to closer destinations or holding off on vacations for a year or two to save money or wait for prices to decrease.

Read the full article at: http://www.businessweek.com/articles/2012-04-02/forget-gas-prices-air-fares-are-getting-more-painful

All Bags Fly for Free...Not Exactly

Southwest Airlines focuses its' advertising campaign and it's slogan attacking other airlines for their gratuitous use of fees. A big Southwest motto is that "Bags Fly Free," which is true unless you are flying on their wholly-owned subsidiary, AirTran Airways. Although it's been three years since the purchase, the fees still remain. AirTran still is an independent operation but Southwest is working on incorporating it and making it a part of the Southwest brand. This is a slow process but also bag fees are a strong source of revenue. The issue is that if Southwest Airlines prides itself on no fees but their subsidiary charges fees will this hurt the brand name.  The merit to Southwest Airlines motto may be tarnished a little bit but the divide between both companies helps distinguish one from the other. I believe that AirTran will have its best year once it's fully incorporated into Southwest.

Read the full article at: http://www.businessweek.com/articles/2012-03-28/at-southwest-not-all-bags-fly-free

UPS: Bringing the Brown Overseas

UPS recently spent $6.77 billion purchasing Dutch rival TNT Express. This deal comes after weeks of negotiations and UPS can now better compete with DHL. According to estimates, UPS will have between ¼ and 1/3 of the European package delivery market. UPS sales will grow from 26% to 36% with the acquirement of TNT.  UPS shares rose 4.2 percent in afternoon trading; they had total sales of $53.11 billion last year and it expects sales of $60 billion with TNT. UPS also was in competition with FedEx Corp. for the acquisition of TNT. By 2015, UPS expects savings to grow from $525 to $725 million a year.  This purchase will make UPS a shipping powerhouse worldwide and FedEx will have to work hard to try to stand up to this new shipping magnate. UPS was always one of the nation’s biggest but now it will be one of Europe’s biggest as well.

The full article can be found at: http://www.lompocrecord.com/business/ups-snags-europe-s-no-package-delivery-outfit/article_4c976b15-dd2c-51d8-9021-a34c109e0e54.html