Analysts, Buyers Say Airfares Are On The Level Again

<B> Analysts, Buyers Say Airfares Are On The Level Again</B>

By David Jonas

As airfares hit the traditional summer leveling-off period, buyers and analysts alike said the year's largest fare increases already have occurred--a welcome indicator that fares could remain flat for many months.

"It appears the airlines will rest a bit. With more capacity coming in during the fall, they wanted to lock in increases early and the rest of the year should be very quiet," said Bob Harrell, a consultant to American Express. He said that an overall fare increase in 1999 of 6 percent already matched the increase for all of last year.

Indeed, the latest Amex Domestic Airfare Index Composite showed early year movement, with April numbers noticeably higher than January's. Full coach edged up 3 percent to $543; typical business rose 4 percent to $481; lowest discount jumped 13 percent to $131; and average fare paid posted a 7 percent gain to an even $300. However, all four fare types rose no more than 1 percent from one month prior, indicating the midyear slowdown already began. In fact, lowest discount fares actually dropped 2 percent from March to April.

According to Rosenbluth's June Airfare Index, fares have increased just over 1 percent since March. However, the combination of increased capacity and growing usage of low-fare carriers could prevent any additional price hikes throughout the remainder of the year.

Terry Trippler, airline expert at Onetravel.com in Brooklyn Center, Minn., said business travelers might be paying lower fares by year-end. "The majors are adding lift and the low-fare carriers have increased load factors in the last few months," he said. "Business travelers are now the ones making the difference because they are moving to discount carriers." Trippler said fares will dip as a result and carriers such as AirTran, Frontier, Southwest and Vanguard will establish a stronger domestic foothold as the majors go global.

Corporate customers also are expecting stable prices for the remainder of the year. Bill Patient, travel buyer for Elf Atochen in Philadelphia, said the current business environment is not conducive to additional fare hikes. "Early in the year, the airlines got two or three increases in there," he said, referring to across-the-board hikes in February and March (<I>BTN,</I> April 26), "but a little extra capacity, combined with their current wait-and-see attitude, should prevent any back-end pressures from raising fares again."

"The airlines will continue to look to raise fares and maximize yields as long as load factors are up," said Phil Dunphy, travel manager at N.Y.-based Pfizer Inc. "But many corporations are posting earnings lower than expected and are tightening their belts. They're looking to lower costs and one way is by lowering the average number of trips taken per employee. That would keep those load factors down."

Despite fairly even fares in recent months, the American Express April index noted that the average domestic one-way ticket price of $300 is higher than ever, and typical roundtrip business fares reached $962, 7 percent higher than one year earlier. That figure underscores the growing difference between typical published business fares and actual paid fares, a gap that now stands at about 38 percent.

"As fares have risen so dramatically in the last year or so, business customers have more aggressively endeavored to keep costs under control," Harrell said. "They are better demonstrating control during the carrier selection process, establishing flat fares and using agent-assisted, Web-based systems where travelers have the ability to digest more information and choose the lowest fare."

Indeed, Runzheimer International's latest Airline Ticket Cost Survey indicates corporations are succeeding in their cost-saving initiatives. The survey reported that the average roundtrip ticket cost dipped slightly in the first quarter to $448, down from $459 in the fourth quarter of 1998 and the lowest since late 1996.