Summer of Full Flights and High Fares

Summer of Full Flights and High Fares
By JANE L. LEVERE
Copyright by The New York Times
Published: May 31, 2010
http://www.nytimes.com/2010/06/01/business/01summer.html?th&emc=th


This is not going to be a good summer for air travelers.

They face a potential combination of crowded flights, high fares and labor disruptions. And that does not even consider the possibility of more canceled flights because of new penalties for airlines that encounter long tarmac delays or the potential of continued disruption in Europe from the volcano ash drifting from Iceland.

Demand for business and leisure travel is expected to be stronger this summer than last, which means travelers will be fighting for seats that have been reduced significantly during the recession.

According to an analysis of first- and business-class travel in the first quarter by the International Air Transport Association, the trade group for the airline industry, the number of passengers traveling in these classes was 7.6 percent higher than in the period a year earlier. The number of passengers in economy was up 7.4 percent in the same period.

Growth in all classes of service is “being driven by business travel, rather than leisure,” the group’s analysis said. “As business confidence and world trade have turned up sharply, business travelers have returned. Consumer confidence has not recovered in the same way as business confidence.”

Major corporate travel agencies in the United States are also reporting strong growth in flying by business travelers. Dale Eastlund, senior director of the consulting group of Carlson Wagonlit Travel, the corporate travel management company, said airline bookings by North American corporate customers were up 15 percent in the first quarter, compared with the same period in 2009.

Michael Steiner, executive vice president of Ovation Corporate Travel in New York, said the number of airline transactions by Ovation’s corporate customers was 22.5 percent higher in the first four months of 2010, compared with the same period in 2009, while the number of airline transactions by its leisure customers was up 39 percent.

These double-digit increases in demand are in no way being matched by similar increases in the number of seats. The Air Transport Association, the trade group of the American airline industry, said domestic capacity will be only 0.2 percent higher this summer than last, while capacity on international routes will be up 6.6 percent.

“Seats will be limited,” said Michael Derchin, airline analyst for CRT Capital Group in Stamford, Conn. “It’s going to be a more difficult travel experience for business people, with 90 percent load factors in the peaks.”

The inevitable outcome of limited seats and stronger demand will be higher fares, at least compared with the greatly depressed levels of 2009.

Business- and first-class fares are up 10 percent globally from their “low point in mid-2009, but they’re still a lot lower than they were prerecession,” said Brian Pearce, chief economist of the international airline industry group. “It indicates the development of a relative shortage of seats.”

From January to April, the average ticket price booked by a corporate customer of Ovation Travel climbed 16.2 percent, Mr. Steiner said.

Mathias Eichelberger, director of airline relations for Egencia, the corporate travel division of Expedia, agreed that fares were rising. “There are going to be very full flights with high prices, especially on trans-Atlantic routes,” he said. “I think leisure travel on the trans-Atlantic is going to come back stronger, with a stronger dollar and overall consumer confidence.”

Another result of more crowded flights could be a dearth of desirable seats, like those on aisles or in exit rows.

“Flights are going to be full,” Mr. Eastlund warned. “In many instances, business travelers will end up in the middle seat.”

And upgrades, which have not been plentiful recently — at Ovation Travel, for example, business traveler upgrades plummeted 21 percent from January to April — are expected to be even scarcer during the peak summer months.

“It will be much more challenging to get upgraded, because of the lack of capacity and the high number of frequent fliers,” Mr. Eastlund said.

Disruption in flying is also possible this summer because of labor problems. Already, British Airways has been dealing with on-again, off-again strikes by its cabin crew, while the management of American Airlines is preparing for a possible strike by its flight attendants.

The volcano in Iceland could also create further disruptions for travelers. Jennifer Wilson-Buttigieg, co-president and co-owner of Valerie Wilson Travel, a corporate travel company in New York, said she was advising clients with connecting flights in any city in Europe “to build in a few extra hours for connecting time.”

The Transportation Department’s new regulations governing tarmac delays could wreak further havoc with air travel this summer because of the potential for thunderstorm delays, some experts say. Under the new rules, the government has said it will fine carriers in the United States as much as $27,500 for each passenger if they keep people on domestic flights waiting for more than three hours on the tarmac without letting them get off.

“I guess airlines will err on the side of caution” if they are considering canceling a flight, Mr. Derchin said, adding that the result could be “more cancellations than normal.” And if capacity is tight, it could be hard to rebook passengers from canceled flights.

To make business air travel as manageable as possible, corporate travel executives suggest booking as far in advance as possible to get the lowest fares and best seats available, and developing a backup plan in case of delays.

They also point out that some frequent American travelers can use automated kiosks to pass through United States customs as part of the Global Entry program. The executives note, too, that the Transportation Security Administration runs a Black Diamond program at many of the major airports that designates security lanes for travelers familiar with the agency’s rules.

There is usually an alternative to air travel “if the potential for disruption is too great,” said Henry H. Harteveldt, travel analyst for Forrester Research. “Take the train, drive or turn to technology.” That way, he said, business travelers can avoid “the hassle factor and not compete for overhead bin space with families.”