Long-lasting Fare Sales Hint At US Airline Gloom
January 10, 2009
Post-holiday fare sales offered by US airlines are scheduled to last much longer than usual this year, reflecting pessimism by those carriers about the economy and travel demand.
The sales, some of which extend into May, reveal a defensive posture by the carriers despite the just-completed holiday travel season that saw relatively high fares and full planes, said Rick Seaney, chief executive of air fare researcher FareCompare.
"There's a lot of uncertainty about what's going to happen over the next six months," Seaney said.
The airline industry was battered severely in 2008 by high fuel prices and later by economic weakness that put a crimp in travel demand.
Despite financial losses, top carriers persevered because of large-scaled downsizing. The capacity cuts enabled airlines to retain the concerted, system-wide fare increases issued in 2007 and 2008.
Base fares currently are about 15 to 25 percent higher for bigger US cities than they were in late 2007, Seaney said.
But the discounts are unusual, he said. Last year a typical air fare sale launched in January lasted into early March. This year, comparable sales are lasting as late as May as carriers try to ensure full planes in the spring.
"They're locking in some of the lower-cost seats for spring travel just to make sure they have all their bets hedged," Seaney said.
United Airlines, for example, has offered a sale on some travel to Australia for trips as far out as April 30. Delta Air Lines has a sale on some trips between New York and Europe and the Middle East that take place between January 12 and April 2.
American Airlines has a sale on travel between Dallas/Ft. Worth and New Orleans that must be completed by April 30.
"We expect some type of fare sales. These sales are a little deeper and I'd say they are a lot longer than we normally would expect," said Terry Trippler an airline analyst.
He said the alternative to long sales would be capacity cuts, which can be difficult for airlines ahead of the busy summer travel season.
"They could cut capacity further, but then they would have to bring it back in the summer," Trippler said.
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