More Airline Consolidation
Delta and Northwest. United and Continental. Southwest and AirTran.
In the last four years, those airline pairs have joined forces in a flurry of megamergers that have swept the U.S. airline industry. Expect maybe one more this year.
"A merger of US Airways and American is inevitable," said airline analyst Bob Herbst of AirlineFinancials.com. "I expect a formal announcement of the merger during the first quarter of 2013."
American's parent company, AMR, filed for bankruptcy protection in Nov. 2011. Since then, it's entered into a non-disclosure agreement with US Airways to discuss a possible union, a shift that American's pilots, flight attendants and mechanics have said they'd like to see. British Airways has also expressed interest in having a stake in American.
American CEO Tom Horton has repeatedly said he wants the carrier to remain independent after it restructures, but that would make it an exception among the large network airlines. US Airways and America West joined in 2005, followed by Delta and Northwest in 2008, United and Continental in 2010. Low-cost carrier Southwest's purchase of AirTran was completed last year.
Other alliances also are forming. Delta announced at the end of the year it was buying a 49 percent stake in Virgin Atlantic, a partnership that will give it greater appeal to the premium-paying passengers traveling between New York and London's Heathrow Airport. (Read more: What a Delta-Virgin Atlantic Alliance Means for Frequent-Fliers)
And it's not just big carriers that may decide to link up in 2013. "It's possible that some of the smaller low-cost carrier airlines could decide to merge in order to be larger, stronger competitors," said Henry Harteveldt, travel industry analyst with Hudson Crossing.
Some industry analysts say the winnowing of airlines gives those that remain more power to boost fares, and shrinks competition in some markets. But a recent report by professional services company PwC US concluded that the spate of mergers the last decade hasn't dampened competition. On average, it found, the top 1,000 routes were served by just under two carriers in 2004, and competition was roughly the same in 2011.
Some relief at the pumps is in sight in 2013. After setting records each of the last two years, gasoline price hikes are predicted to subside a bit.
"I don't believe 2013 will feature as high of a yearly average as 2012," said Patrick DeHaan, senior petroleum analyst at GasBuddy.com, which monitors gas prices. "The good news for motorists is that booming domestic production is leading to high inventories of crude oil."
The average price for a gallon of gasoline nationally came in close to $3.63 a gallon last year. The U.S. Energy Information Administration projects prices should average $3.43 per gallon this year.
Brian Milne, energy editor for Schneider Electric, said demand for gasoline fell 3 percent last year because of the poor economy. The growth of energy-efficient cars also dampened demand, he says.
"The economy has been so terrible," Milne said. "When people are unsure of the economy, unsure of their status, afraid of losing their jobs, they cut back on discretionary spending and are more careful with their finances, and that tends to mean less gasoline demand, as well."
Expect the highest prices when refineries switch from winter to summer blends in March and April, and when Gulf Coast refineries brace for hurricane season in August and September, DeHaan said.
The Transportation Department has taken a more aggressive role in protecting air travelers the last four years, and it isn't letting up.
The department's latest proposal, which is expected early this year, could force airlines to provide common fees, such as those charged to check luggage and pick seats, to websites that compare airfares. (Read more: Fees Undermine Fliers' Ability to Compare Airfares)
"With so many extra fees, consumers are getting a bit punch-drunk," said Charlie Leocha, director of the advocacy group Consumer Travel Alliance and who's on a department consumer advisory board.
It's a contentious debate, because airlines prefer to sell tickets on their own sites and pay to be included in comparison sites. Nicholas Calio, president of the industry group Airlines for America, opposes the proposal, saying the "reasoning is flawed."
It's not clear yet what will be in the rule. But the department in December said it was actively working on the rule "that could require, among other things, that optional fees be displayed at all points of sale."
Separately, the DOT's Advisory Committee for Aviation Consumer Protection will continue reviewing suggestions to make air travel easier. The panel's recommendations in October called for greater transparency in ticket pricing, simplifying contracts that accompany plane tickets and providing relief areas at airports for service animals.