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Financial Services Industry

Airfares just keep on skyrocketing

Kiplinger's Personal Finance Magazine, Jan, 1998 by Lynn Woods

Airfares have taken off over the past year or so, and it will probably be a while before they come back down to earth. Business passengers have been hit hardest because they usually can't take advantage of discounted restricted tickets. But even leisure travelers need to be more resourceful, and more flexible, to find the best fares.

The average price of an unrestricted coach ticket for travel within the U.S. jumped 17% in 1997, according to the American Express Domestic Airfare index. After factoring in discounted leisure fares and special discounts negotiated by corporate travelers, the average ticket price for 1997 was about $278, up $22 for the year.

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International business-class fares have also increased significantly, particularly on transatlantic routes, where overall fares are up 30% in the past year, says Joe Broesler, director of rates and tariffs at Hickory Travel Systems, a travel-marketing company in Saddle Brook, NJ. While flights to London have traditionally commanded the highest business-class fares, other foreign cities are catching up. Flying one-way to Frankfurt, Germany, from New York City costs about $2,200, compared with $1,600 a year ago, says Broesler.

What's driving airfares higher is the strong economy. With planes nearly full, airlines can charge top dollar. "They're making hay while the sun shines," says Terry Trippler, editor of the Airfare Report, a newsletter in Minneapolis ($48 per year; 800-218-9441).

In addition, the evolution of "fortress hubs," in which one carrier predominates at a certain airport or city, has led to exceptionally high fares in some markets. For instance, among pairs of cities that are 151 to 200 miles apart, the highest average fare in the first quarter of 1997 was $259 one way between Philadelphia and Richmond -- route served almost exclusively by US Airways, which controls 98% of the market. By comparison, the average one-way fare between Chicago and Indianapolis, a flight of approximately the same distance, was $85. United Airlines, the dominant carrier, controls just 47% of the market and faces stiff competition from Southwest Airlines.

The dwindling number of low-cost air carriers has also caused fares to rise in some markets. But that trend could be turning around. The Department of Transportation recently awarded five low-fare carriers takeoff and landing rights at New York's LaGuardia Airport and Chicago's O'Hare International. From Laguardia, for example, AirTran Airlines (which recently merged with ValuJet) may now offer daily flights to Atlanta, a high-fare route dominated by Delta Air Lines. From O'Hare, Trans States Airlines will be flying to four southern destinations: Asheville, N.C., Chattanooga, Tenn., Roanoke, Va., and the Tri-Cities area of Tennessee and Virginia.

Opening airports to low-fare competitors may also help newcomers such as Pro Air, based at Detroit's City Airport. With first-class as well as coach service, Pro Air has brought fare relief to passengers flying nonstop from Detroit to Baltimore/Washington (one-way coach fare is $79), Newark ($79), Milwaukee ($69) and Indianapolis ($59). And at least two major carriers are operating their own successful discount operations with no-frills, one-class service on shorter flights: Delta Express, serving 11 cities in the Northeast and Midwest plus four destinations in Florida; and Shuttle by United, with about 450 flights a day along the West Coast. US Airways may also introduce a low-fare alternative.

STRATEGIES FOR SAVING

The pendulum will eventually swing back in favor of travelers as airlines stock up on new aircraft and increase capacity, or as the economy softens. But that may not happen until the turn of the century. In the meantime, what's a budget-minded traveler to do?

* Visit the Web. The best deals on the Internet are generally last-minute weekend specials that major air carriers post on their Web sites. In most cases, travelers who sign up for a service are e-mailed a list of specials every Wednesday night and can book by calling an "800" number. Some carriers have extended their specials and their minimum-stay requirements to include international destinations as well. Recently, for example, TWA posted a round-trip, nonstop fare from St. Louis to Paris of just $288, with a Friday or Saturday departure and a return flight on the following Wednesday.

Visiting each airline's site can be time-consuming, however. One Web site that lists all the weekend deals is www.marcopolo.com. Maintained by the Beard Group, an independent publisher, the site also posts last-minute hotel and restaurant specials.

But you'll get the most comprehensive news about special fares, fare sales and other airline promotions at www.bestfares.com, the online service of Best Fares magazine ($59.90 per year; 800-228-7956). Subscribers have exclusive access to information in the online publication, such as special fares negotiated by Tom Parsons, the magazine's publisher, and a monthly update of cities served by low-fare carriers. But the site also has a news service fisting hundreds of discounted fares (including the airlines' Internet weekend specials) that anyone can peruse.

Financial Services Industry

Airfares just keep on skyrocketing

Kiplinger's Personal Finance Magazine, Jan, 1998 by Lynn Woods

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