Passengers have become accustomed to receiving lower fares when they ask for Southwest Airlines, Jet Blue and Air Tran. However recently, the legacy airlines, United, Delta, American and others have closed the gap.
The advantages that "low cost" carriers had in the past are vanishing. For one thing, their fleets are now aging, their maintenance is higher, and they have the same efficiency as the legacy carriers. All airlines have to cough up the dough at the gas pump as jet fuel prices have surged. In the past, Southwest Airlines have deftly played the hedging game to near perfection, but nowadays it is more of a level playing field.
Labor costs are trending to about the same, although Southwest still has the advantage.
Legacy carriers have also done a skilfull job in leveraging their presence worldwide through joint ventures, alliances and code shares.
IATA has just lowered guidance for airlines profitability in 2011 mainly due to fuel costs. Ancillary fees, the new cash cow for airlines are expected to generate a higher percentage of airline revenue going forward.
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