Just had a word with my Mum on the phone, petrol at the pumps in Corfu is not far behind what we pay here now.
About these flights, reducing capacity will actually keep costs down and hopefully these can be passed on to you, aviation fuel has doubled in price in the past year, to a point we can absorb these costs but now the increase is to sharp, the only way to keep this both profitable and affordable is to remove any slack from the flying programs. Interestingly 2008 had many more flights to Corfu than 2007 and 2009 is predicted to have the same amount as 2007 (ish) so I don't think all the doom and gloom is warranted.
When booking a package you also get the flight at a subsidy, flight only you do not that's all part of the deal of buying the package the whole is cheaper than the sum of its parts. Flight only's will seem to have the sharpest increase and it will be anything from 20% - 50%, however the prices you are seeing now are the release prices and have yet to be affected by trading conditions, I would expect them to come down in the latter part of this year, more than anything it is imperative we get bums on seats, if the holidays are not selling well then the seat only's will be released at a cheaper price.
The package deals for next year are comparable with this year, finally something we can thank the merger for, the biggest issue facing Greece, Spain, etc is the strength of the Euro, without putting prices up things in Corfu are already 15% more than last year, which very quickly adds up, and how can you expect businesses not to raise their own prices when their costs are going through the roof.