"Planes filling up, but fares stuck in '80s"

Sunday, September 7, 2003

Planes filling up, but fares stuck in '80s
Airlines holding their collective breath this fall
By RICK BARRETT
The Milwaukee Journal (WI) Sentinel


Coming off a strong summer, airline passenger traffic has been up, airfares
down, and travelers can fly to more cities than ever from Mitchell
International Airport.
 
Airlines face an important test this fall as many leisure travelers wind
down their vacation plans. By the winter, they could know whether a respite
from the worst downturn in aviation history is for real or a false hope.

"The airlines are headed into uncharted waters," said Peter Yesawich,
president of Yesawich, Pepperdine & Brown, an Orlando, Fla., travel research
firm.

For travelers, airfares have fallen to some of the lowest levels since the
early 1980s. The rapid expansion of low-fare carriers such as Southwest and
AirTran has pushed fares downward, and that's not likely to change soon.

But it could be harder this fall to get some of the cheapest fares as
airlines reduce the number of flights and available seats in an effort to
control costs.

Airplanes are filling up faster, and the least expensive seats are snapped
up quickly, said Edward Hasbrouck, a San Francisco travel writer and author
of "The Practical Nomad: How to Travel Around the World."

"We had a great period where people could get really cheap fares even if
they waited until the last minute," he said. "But the planes aren't running
so empty now. . . . You can still get Thanksgiving and Christmas travel at
really good prices if you book soon. But if you wait very long, you won't."

Is it time for a rebound?
For the airlines, one of the big unknowns is whether business travel will
rebound this fall after having languished since the Sept. 11, 2001,
terrorist attacks and the recession that followed.

In previous years, airlines relied on business travelers - who typically
paid higher fares - to pick up some of the slack in the fall and winter.

"There is a great, big question mark over that this fall," Yesawich said.
"If you put everything in the pot and stir it up, the forecast for business
travel is only guardedly optimistic, with the emphasis on guarded."

Even if business travel rebounds, many companies will not return to the days
when they paid premium prices for most of their flights, Yesawich added.

"All it takes is one or two experiences for someone to change their buying
habits," he said. "Business travelers have learned that if they look a
little harder, they will be rewarded with a better price."

The change is permanent, said Kevin Mitchell, chairman of the Business
Travel Coalition, based in Radnor, Pa.

Companies are going to use more discount travel services and cheaper,
non-refundable tickets. In many cases, the changes are being ordered by
senior management.

"Senior managers and chief financial officers are all over this," Mitchell
said. "They are not just managing travel through a period of economic
softness; they are managing travel strategically for the long term."

Low airfares and additional airline service helped boost passenger traffic
at Mitchell Airport to a near record in July, airport officials said last
week.

With 561,200 passengers, July was the third-busiest month in the airport's
history. The busiest month was March 2000, when there were 575,922
passengers.

Four airlines - Midwest, Northwest, Delta and AirTran - have announced
expansions or new types of service in Milwaukee in the last six months.
Denver-based Frontier Airlines started service here about 10 days ago.

Cheap fares will probably stick
With the stepped up airline competition and additional service in Milwaukee,
cheap fares and increased passenger traffic are probably here to stay, said
David Stempler, president of the Air Travelers Association in Washington,
D.C.

"It almost makes Milwaukee a third airport for Chicago and northern
Illinois," he said. "If you have a cluster of low-fare carriers, the area
from which an airport draws passengers becomes exceedingly large. Internet
travel services will search 100 miles for airports with the best fares, and
people will drive long distances to get them."

Mitchell officials say they have noticed an increase in Illinois license
plates in the airport's parking lots and that more people are flying from
Mitchell to the Baltimore airport, near Washington, D.C.

One-way airfares from Milwaukee to Baltimore have been advertised at $49,
and both Midwest and AirTran have weighed in heavily on the business.

The Baltimore airport has become a hot spot for discount airlines, Stempler
said. License plates in the parking lots there cut a wide swath across the
East Coast, including New Jersey, Pennsylvania and Virginia.

The Baltimore airport has become so popular that an airport in Pennsylvania
has put up highway billboards to try to lure residents of that state back
home.

Airlines also are fighting for every customer, which is a great benefit for
travelers in cities such as Milwaukee, said Evans Gebhardt, president of New
York-based Cendant Travel Distribution Services, which owns
CheapTickets.com.

"It is trench warfare" at the local level, he said.

High fees still a sore spot
One sore spot that's not likely to go away this fall are high fees
associated with the purchase of airline tickets. In some cases, the fees
represent 50% or more of the purchase price.

"The traveler, more often than not, has become the lackey" for governments
and airports to pass on fees, said Jay Sorensen, a former Midwest Airlines
executive and vice president of the travel service OffPeakTraveler.com.

"It's probably going to get worse," he said.

The major airlines, especially, are worried about how they are going to
survive the slow seasons, said Richard Butler, an economics professor at
Trinity University in San Antonio.

Airlines can't afford the ticket price wars forever, said Randall Smith,
Midwest Airlines vice president of sales and distribution.

"It might sound like a great deal for consumers that prices are at
rock-bottom levels," he said. "But you also want to make sure that airlines
will be around for a while, and it takes a certain amount of revenue to do
that."


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