Heavy Traffic Ahead: Summer Airline forecast Calls For Strong Demand, Less Capacity, Steep Jet Fuel Costs, Higher Prices

A week into what is projected to be the busiest summer travel season ever, corporate travelers face three months of near-full airplanes, heavily trafficked security checkpoints and congested airports, while their companies can expect to pay higher airfares than last summer.

New highs in passenger traffic levels and less capacity to soak up strong demand are aligning to create a summer of discontent for air travelers, but bring some relief for airlines determined to inch up their margins.

"For the airlines, it will be the best summer in a long time," Air Transport Association's chief economist John Heimlich said last week. "The caveats to that may be possible Transportation Security Administration staffing levels, convective weather, congestion and, again, it will be an all-time record for jet fuel prices. Yet from a demand perspective—and demand to me isn't just volume, it's the mix of volume and price—this will be the best position we've been in since summer 2000."

The Air Transport Association predicted that a new high of nearly 207 million passengers will board commercial airplanes in the United States this year, representing a 1 percent increase over last year's summer record of nearly 204.6 million.

Domestic capacity, meanwhile, will be down this summer over last—leaving fewer planes to carry more travelers. ESkyGuide, a flight database published by American Express, projects domestic flights to be down 4 percent for the June, July and August timeframe over last year, with a weekly domestic average of 196,072 domestic flights. "International flights for the collective summer months will average 27,635 per week, up 1.1 percent versus the same period last year," according to ESkyGuide.

Air Transport Association's Heimlich said the summer's confluence of traffic and capacity should bring record-high load factors of 85 percent and make planes more full on average than any other summer.

"The planes are virtually full," said president of the Air Travelers Association David Stempler. "What we tell our members is you'll either be in the middle seat or next to someone in the middle seat."

Bob Harrell, principal at airfare consultancy Harrell Associates, said summer marks an ideal time for carriers to push through fare increases, and high traffic coupled with shallower inventory give airlines further pricing power.

"Business fares are up about 20 percent over where they were a year ago and the most notable event in 2005, after SimpliFares being introduced in January, was a very dramatic hike in fares in the middle of the summer," Harrell said. "In the middle of July 2005, business fares in a single week went up about 8 percent. That's unheard of. What they did was they lifted the caps and increased a lot of fares. The carriers may have a sense—and obviously there are economic pressures to do this and market forces, and so forth—that people pay less attention that time of year. If last year is any experience, if they're thinking about doing something, it's quite possible that it will be during July or August."

Despite Harrell's depiction of dramatic growth year over year, Heimlich said fares still remain historically low—particularly when compared with the often-benchmarked year of 2000.

"If you look at the first four months of this year, average domestic fares are down 13 percent from the first four months of 2000," Heimlich said, "but in that same period, jet fuel prices are up 129 percent. So this summer, the airlines need the higher fares to partially offset the increases in costs. The gap has not been closed. By definition, if they had, they'd be reporting profits."

The Travel Industry Association of America last month said summer increases in cost would not prohibit travel. "Continuing past trends, air travel and hotel demand will rise even as hotel room rates and airfares go up."

Airport congestion has registered as a potential problem. "Assume there is going to be a line everywhere: from getting into the airport, to the parking lots at the airports, to checkin counters, the security line, the Starbucks at the gate," Stempler said. "Just allow plenty of time."

ATA's Heimlich said congestion "is a concern at some airports. TSA recognizes our forecast and there's a lot of pressure on them in terms of not only staffing levels but also staffing efficiently. Some airports have seen some improvements in the physical checkpoints."

Airlines, ATA and others in the industry have been encouraging travelers to take advantage of airport kiosks, online or curbside checkin and limit carry-on items to expedite security clearance and keep lines moving. "A lot of it is just common sense," Heimlich said.

"When the system is strained like that, you have to be totally compliant with the airline's rules," Stempler said. "If you haven't checked in your luggage on time, if you don't get to the gate on time, if you don't get to the airplane on time, the likelihood of getting on the next flight after that becomes greatly reduced, because there's just not room in the system. This is like flying on the Wednesday before Thanksgiving or the Sunday after—the system is strained."

The Transportation Security Administration said it is bracing for 200 million air travelers nationwide between Memorial Day and Labor Day, and is reminding frequent travelers to take steps to make their journey go more smoothly, such as clearing luggage of prohibited items including lighters. TSA also recommends travelers bring a small bag for such personal metal items as cell phones and jewelry that can be placed on the X-ray machine to avoid tripping the metal detector and causing delays.

"This will be one of the busiest travel seasons on record and TSA will be ready," said Kip Hawley, assistant secretary of homeland security for TSA. "Summer travel is a team sport, involving TSA, airlines, airports and passengers." Among other steps, TSA will increase hiring at local airports to better prepare for spikes in passenger volumes, Hawley said.

—Patty Donmoyer contributed to this story.