Somewhat friendly skies

By Jennifer Garrett

The airline industry is facing one of its worst downturns in history – including the fall in demand after September 11. High fuel prices in 2008 and volatile prices throughout 2009 combined with the major plummet in corporate and meetings travel have forced the industry as a whole to cut flights, capacity and select destinations entirely.

Such a lack of demand has brought a glimmer of hope to travelers in discounted fares and fire sales. The Los Angeles Times reported that the average cost of a plane ticket fell 9.1 percent in the first quarter of 2009 compared to the last quarter of 2008, which was the largest quarter-to-quarter drop recorded by the Bureau of Transportation Statistics.

At the same time fees have increased and new ones have been introduced in an effort for airlines to get whatever money they can from travelers, raising new concerns. The U.S. House Transportation Committee’s chairman, Rep. James Oberstar, D-Minn., thinks the government should take notice of the rise in “a la carte” fees being levied by the airline industry. Oberstar pushed the Government Accountability Office to look into whether the new fees, which range from charges for checked baggage to seat-selection, are excessive or out of line with the cost to the airline of providing the services. He cites the revenue that the airlines have collected as evidence and suggests that the money should go to the Airport and Airway Trust Fund, the federal program that finances airport improvements. Rep. Jerry F. Costello, D-Ill., chairman of the House Transportation aviation subcommittee, also signed the letter to the GAO.

Airfares are expected to remain low through the fall with the increase of discount carriers to major airports as well as discounts to try to increase capacity on all flights, but a 2010 forecast by Carlson Wagonlit Travel North America predicts that airfare discounts might not be here to stay. The continued cuts in capacity as well as steady oil prices and even a slight rise in demand could push ticket prices back up.

Other promising news for the meetings industry is Delta Airlines’ reintroduction of its Delta Meetings Network. The program, which was discontinued in 2005, was rolled out August 17, including an introductory promotion of one free ticket for every 20 flown tickets for new contracts signed by Sept. 30, 2009. The basic product offers one free ticket for every 40 flown, as well as discounts off published fares, for groups of 10 or more traveling to any of Delta’s 376 destinations from at least two U.S. cities.

New Horizons

The landscape of the airline industry is in a constant state of flux. Not only are prices and fee schedules up in the air, but the cities that each airline services are changing as well. Discount airlines are taking up real estate in major airports, whereas they used to stick to suburban, less expensive destinations.

Discount carrier Southwest Airlines, which has the most passengers in the country, entered both New York’s LaGuardia Airport and Boston’s Logan International Airport this summer. Competitor JetBlue has quickly become the largest airline as far as number of flights and nonstop destinations at Logan, which forced Southwest to take another look at the busy airport after previously being wary of entering major airports.

“Some things in the industry have changed and some things about Southwest Airlines have changed,” Bob Jordan, Southwest’s executive vice president for strategy and planning, told The Wall Street Journal. “Twenty years ago the low-fare carrier side of the market was a niche. Today, the airline industry is a low-fare industry.”

Delta announced it is reducing flights at Cincinnati, one of its longtime hubs, by 17 percent in September, shrinking the hub from more than 600 flights in 2005 to 215. Delta says the move is an effort to maintain the hub until at least summer 2010.

Delta Air Lines and US Airways announced an agreement to trade airport slots at New York’s LaGuardia Airport and Washington D.C.’s Reagan National Airport. Delta would gain 125 daily arrival and departure slot pairs at LaGuardia and US Airways would gain 42 daily slots at Reagan if the government gives approval. AirTran will gain slots at both LaGuardia and Reagan in exchange for all of its slots at Newark Liberty International Airport in a deal with Continental Airlines effective in October.