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Air fares are up, up and away

By Aaron Smith, staff writer

NEW YORK (CNNMoney.com) -- If you want to fly for the holidays, then get ready to empty your wallet, because air fares are heading sky-high.

The average price to fly one mile rose 14% in August, compared to the same month in 2009, according to a report by the Air Transport Association (ATA) of America -- the industry trade group for U.S. airlines. The ATA considers the average price paid per mile to be an accurate measure of air fares.

The industry trade group did not provide a forecast for the holiday season. But Rick Seaney, chief executive of Farecompare.com, said there's no reason to believe that fares will decline for the holiday season.

"[Consumers] are thinking that if they wait until the last minute, prices will drop, but that's just not going to happen this year," he said.

Seaney said that by his own calculations air fares are up 17% year-to-year. One of the reasons why the increase is so dramatic, he said, is because air fares bottomed out in 2009 -- along with the recession.

During the recession, he said many people who would normally fly opted to stay home for the holidays. Hard-hit airlines also had to cut capacity to save money in the face of high fuel prices. They put fewer planes in the air, meaning fewer seats and fewer choices for consumers.

Nowadays, Seaney said, "Fuller planes and less seats mean higher prices." He said that airlines have been "showing unusual discipline" by not adding flights.

While this isn't good news for consumers, the rise in air fare prices bodes well for the airline industry. The ATA reported that passenger revenue rose 17% in August 2010, compared to the same month last year. This is the eighth consecutive month of revenue growth, according to the group.

The rise in revenue is partly related to the ancillary fees that airlines have added in the last couple years for services that once were free -- like checked baggage, food and non-alcoholic drinks.

"It's part of why you have á la carte fees. Because the airlines have been keeping their base fares low, and then bringing in the revenue they need for sustained profitability through ancillary fees -- like bag fees," said ATA spokesman David Castelveter.

Airlines are now betting that cash-strapped consumers who skipped holiday travel last year won't do it again.

"I think you're going to see a lot of pent up travel demand," Seaney said. "Grandma will hit you with a rolling pin if you don't come in a two-year period."

-- Correction: An earlier version of this story incorrectly reported that the ATA provided a forecast for the holiday season. To top of page

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