Passengers adjust course as fees soar, service plummets
By Chris Walsh, Rocky Mountain News (Contact)
Published July 4, 2008 at 9:05 p.m.
Tardy flights, cranky workers, missing bags and cramped cabins often top the list of consumer complaints against airlines.
But travelers, one could argue, have been spoiled during the past seven years.
Service deteriorated in many ways. But fares dropped to record lows, opening up the country - and the world - to millions of people, boosting tourism and cementing air travel as an integral part of how Americans get around for business and pleasure.
The landscape, however, is shifting again in the age of $140-a-barrel oil, and travelers face a new reality.
U.S. airlines have hiked fares substantially over the past year and are adding a host of fees for everything from in- flight sodas to checked bags, all in an attempt to stem steep losses that by some estimates could hit $13 billion this year.
Paying more for less
More fare and fee increases are on the way, and experts fear that service and on-time performance will continue to deteriorate.
That's going to force consumers to change their travel habits and to shell out more for quick weekend jaunts as well as long-planned trips home for the holidays. Dozens of smaller communities will lose regularly scheduled commercial service, while consumers in major cities will have fewer options on each route.
"People are paying a lot more money for gas, some can't make their mortgage payment, others are worried about getting laid off from work, and fares are going up," said Joe Brancatelli, an industry expert who runs a Web site for business travelers. "Flying for a vacation is not on their minds. Businesses are cutting back, so they ain't flying either."
Demand for air travel reached record highs in recent years but is slowing amid substantial fare hikes and could drop precipitously later this year.
Most U.S. airlines are getting rid of aircraft in an effort to reduce capacity. Denver's two largest carriers, United Airlines and Frontier Airlines, both plan to ground planes and cut service significantly this fall.
Some airlines are hooking up, either through mergers or partnerships. Others, such as Frontier, are operating under bankruptcy protection.
"To say the least, the next few years will be a challenging time for airlines," Forecast International, a Connecticut- based market research firm, wrote in a recent report. "The industry is undergoing a restructuring. A few carriers have disappeared, others are consolidating, and still others are revising the business models under which they operate."
Combined, it's enough to make jet-setters and occasional fliers alike shudder - and scale back on flying.
And that's exactly what is happening.
"Up until the last six months and the most recent oil spike, we hadn't seen that much of a dent in the way consumers look at travel," said George Van Horn, senior analyst at IbisWorld, a Los Angeles- based firm that provides research on numerous industries including airlines. "But we're now seeing a change because everything is costing more. We believe people this year are gravitating towards shorter trips, maybe in their cars, and dividing up their leisure time differently."
IbisWorld's most recent report on the industry predicts modest long-term growth by 2013, although it doesn't break out forecasts by year.
Numerous consultants and other industry experts, though, are predicting a double-digit decline in demand in coming months, which would coincide with the level of capacity cuts at most airlines.
Changes in habits
Consumers will adapt by changing their travel habits, potentially by traveling less frequently or to cheaper destinations, said Evergreen-based aviation analyst Mike Boyd.
"We're talking about a major change in the economic business model, and that's going to change who uses airlines and how often," Boyd said. "Instead of a trip to Orlando every year, you may go every three years or maybe not at all. Any place that's dependent upon high-volume traffic is going to be in trouble."
Travel Partners, a travel agency in Broomfield, has noticed some changes among its clientele, said owner Chris Russo.
The average vacation package he sells has gone up between $75 and $100 per person over the past year, mainly because of airfare hikes. Combine that with financial stress in general, and "we're seeing that people are planning a lot more in advance," Russo said. "They want to know what the cost is way ahead of time, so they can make sure they can pay it off."
Still, experts and consultants say that most Americans will continue to travel by plane.
"We are a nation of addicted travelers," said Peter Greenberg, travel editor of NBC's Today show. "It's culturally embedded in our DNA to travel, and none of this is going to change that."
walshc@RockyMountainNews.com or 303-954-2744
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July 5, 2008
12:50 a.m.
Suggest removal
gwats writes:
These are tough times for sure, but Americans still have a knack for affording the things they WANT vs. the things they NEED. Guy got on the bus the other night and told the driver he had no money. But he has a 'little' package from the liquor store in his left hand. Priorities. I know a couple with one of those bad ARM mortgages. Instead of scraping together every nickel they could find to save their home, they are planning a three day cruise this month. How to pay for it? Let their 11% sub-prime mortgage 'slide' for the Month. The wife works for DPS, which means she collects summertime unemployment but insists on blowing $3000 for a 3 day trip for the family of 4. No wonder my block has 5 foreclosed homes out of 14. I strongly suspect the Airlines will adapt and adjust to the new realities. As long as people value a three-day $3000 trip over a stable 30 year mortgage. the Airlines will find enough priority-challenged losers to keep the doors open.
July 5, 2008
3:23 p.m.
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robbyr2 writes:
You may be right, backspace, but the baggage surcharges aren't the half of it. The airlines are going to have to double if not triple their airfares if jet fuel continues at current levels much less goes up another 33% as some predict by summer's end.
I do disagree a bit with Ibisworld's expert though, I suspect people will make fewer weekend trips and more one and two week vacations again, at least in the long term. People used to take longer vacations because it cost so much to get to your destination. If it costs $600 per person to go to London for 4 days, some might consider it. If it costs $1200 or 1800 to fly there, those same people might decide to go, but only if they can stay longer.
July 5, 2008
5:37 p.m.
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sunflower writes:
Coming soon to Concourse A, "Freedom to Move About the Country"
July 6, 2008
8:30 a.m.
Suggest removal
david.miller writes:
gwats, I agree with you in great measure. So many Americans have an incredible sense of entitlement while exhibiting a complete lack of personal responsibility, ultimately expecting government to bail them out while blaming the lender or perhaps someone else for their financial woes. As a society, we must stop rewarding people for their bad decisions. Nevertheless, I disagree that these are necessarily tough times. Inflation remains low and unemployment stands at about 5.5%. I would offer instead that these are changing time; and with changing times comes opportunity.
With respect to the airline industry, this is one area of our economy that I have never been able to understand. Since the early 1980s, firms have continued to enter or stay in the market despite over-capacity or excess-supply becoming the norm. To me this is irrational because such conditions cry out for industry contraction that would result in higher revenues and normal profits. In other words, I’ve never understood why investors would continually supply capital to this industry in the quantities they have given the historically undisciplined nature of this market and inherent risks.
As for what’s happening today with tack-on fees for extra bags, aisle seats and snacks coupled with no resolution to the inconveniences, I doubt if this model will improve the bottom line in the long run because it really does not address the issue of customer satisfaction, at least in my view. Again, I’m surprised investors don’t opt for more quality investments than can be found in the airline industry which would cure the excess-supply problem.
July 6, 2008
11:42 a.m.
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kali73 writes:
Charging fees actually benefits the customer because of taxes. If airlines increased the airfare by $15 it then becomes @ $20 because of all the taxes our government applies to airfare. But as a fee, it stays only $15 - and the airline gets it right away instead of waiting until the passenger flies (regarding Frontier and First Data issue). Same deal with food - passengers complained, so now pay for it if you want it, minus the taxes.
Also, when I pack smart and fly with a carryon, I should not pay the same as a family that can not pack, has baby strollers, 2 large bags each because the carryons are full of toys so the children forget thier parents are dragging them away from home for the holiday. That is an overpacker's right - but make them, not me, pay for the baggage person lugging all their stuff!
July 25, 2008
9:46 a.m.
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fastnloose writes:
People usually travel with to much crap period.As far as Ghetto-West coming to concourse A,when their cost of fuel catches up to the rest of the industry,they will not be expanding anywhere.