A discussion about the airline industry, airline employees, and all things related

The cost of international air travel is likely to keep on rising despite a transatlantic probe into possible collusion by some airlines over ticket prices and fuel surcharges, analysts said on Thursday.

A joint investigation by US and UK authorities may make airlines more careful with their pricing and surcharges, but is not likely to stop carriers raising their fares, they said.

"We are likely to see continued fare increases and higher fuel surcharges," said Jim Corridore, an equity analyst at Standard & Poor's. "Obviously, (airlines) are going to be very careful in how they apply those from now on."

UK authorities have raided British Airways offices in the probe. American Airlines, United Airlines and Virgin Atlantic said they were also involved, although they said they were not direct targets. The US Justice Department said it was also investigating possible anti-competitive practices in airline fares and cargo rates.

Despite the investigation, international air ticket prices, already at 6 year highs, look set to continue their ascent, bolstered by limited competition, low capacity increases on most routes and high demand fed by a growing global economy.

The average one-way airfare between 160 international city pairs is estimated to have grown 7.2 percent in the first quarter of 2006 from USD$1,547 in the first quarter of 2005, according to Prashanth Kuchibhotla, a specialist at American Express' business travel unit.

International business-class tickets, which are the primary profit drivers for full-service airlines, are estimated to have ended March costing 5.9 percent more than the first quarter of 2005.

"International (flying) has been one of the few bright spots for the airline industry for the last few years," Kuchibhotla said. "(And) summer is still looking pretty strong."

Lured by the promise of profit on international routes, and faced with competition at home from discount carriers, major US airlines such as American Airlines, Continental Airlines and Delta Air Lines have been shifting focus to international routes.

US carriers expanded their international capacity, the number of seats for sale, by 5.1 percent in May, while cutting domestic capacity by 5.7 percent, according to Air Transport Association data.

This capacity increase has raised concerns about the possibility of pressures on pricing in some markets. But for most part, airfares look set to keep going up, analysts said.

Airwise News