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Despite Stability in Fuel Prices, Airfares Predicted to Climb This Year

For David Cohn, who heads the San Diego-based Cohn Restaurant Group, which opened its first eatery in Maui recently, a projected hike in airfares is a double-edged sword.

As a business traveler, he’s subject to higher airfares. But as the owner of 11 restaurants and clubs, including the Gaslamp Strip Club, Mister Tiki Mai Tai Lounge and Blue Point in downtown’s Gaslamp Quarter, he is happy to see an increase in tourism, which includes the return of the business traveler, who all but vanished from the scene after the terrorist attacks of Sept. 11, 2001.

The San Diego Convention & Visitors Bureau predicted that the county’s visitor count would increase from 27.6 million in 2006 to 28 million this year.

Flying back and forth to Hawaii on a regular basis for the last couple of years, Cohn has seen ticket prices fluctuate from $400 to as much as $1,200.

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“It all depends on when we come over,” he said via a cell phone while in Maui, Hawaii, last week. Unlike most businesspeople who have little choice but to pay the higher ticket prices since their travel plans are impromptu, Cohn has some leeway.

“We’re able to manage prices somewhat because we can control our schedule,” he said.

Though special deals exist for early buyers, ticket prices, which jumped 18 percent in the last two years, are expected to go up an additional 6 percent this year, according to the annual American Express Global Business Travel Forecast.

Spiking fuel prices were blamed for fare hikes last year. This year, despite anticipated stability in fuel prices, the blame is being put on continued consolidation in the industry , overlapping routes could be eliminated , and a reduction in overall capacity as demand remains stable.

For the first time since the low-fare carriers entered the picture in the wake of airline deregulation in 1978, flights are about 80 percent full, and the discounters are no longer in control. Air travel is a seller’s market, analysts are saying.

The average business trip, including hotel accommodations and rental cars, will cost 4.5 percent more this year than in 2006. Since room rates at luxury hotels are projected to jump by 8 percent, and rooms at midpriced properties could go up in the range of 3 percent to 6 percent, many companies may be booking shorter stays at less convenient, less costly places, according to the American Express report.

John Chalker, who serves on a citizens advisory committee to the San Diego County Regional Airport Authority, said that as a rule, declining fuel prices result in a decline in airfares.

“Fuel is now the largest percentage of expense that an airline company has,” he said. “It used to be labor.”

Yet with more people fighting for fewer seats, prices will continue to climb.

“And if more businesspeople on planes are paying the premium rates, that means fewer seats for the vacation folks and those seats are then going to be more expensive,” Chalker said. “Frankly, the airline industry needs to have a period when they can earn some significant profits to put them in a stable condition.”

According to an annual economic outlook by the Air Transport Association, an airline trade group based in Washington, D.C., U.S. carriers, including cargo and passenger airlines, are expected to see an aggregate net profit of approximately $4 billion in 2007.

Meanwhile, the number of people who flew in and out of Lindbergh Field remained steady year-to-date through November at 16.07 million, up 0.5 percent compared with the same period in 2005.

The amount of freight hauled was up 8.2 percent to 154,969 tons, while aircraft operations , takeoffs and landings , held steady at 202,849, an increase of 0.6 percent.

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