As LCCs Wander, Fares Flutter At Airports Big And Small

The U.S. Department of Transportation's Bureau of Transportation Statistics last month reported average domestic airfares in the top 100 U.S. airports were 7 percent lower in the fourth quarter of 2009 than in the same period in 2008. FareCompare CEO Rick Seaney said fares this year have been ticking upward moderately.

Considering fares were down by more than 7 percent in the fourth quarter of 2009, compared with an "abysmal" fourth quarter of 2008, Seaney said, "Really, there's no place for them to go but up."

Pricing power has been firming steadily, but moderately, since domestic fares hit their bottom in May 2009, Seaney said. "The cities that typically get hurt the worst from airfare hikes are smaller retail airports," he said. "In cities like Savannah and Burlington, there's just not enough competition to drive fares back down when carriers do systemwide fare hikes, even thought they didn't get many in last year—just four total and all those were after July."

LARGEST INCREASES

Savannah, Ga.—A 4 percent fare increase from the same quarter the year before would appear modest, but it was enough to make Savannah home to the biggest average airfare spike among the top 100 airports in the country. Reduced capacity, a dearth of low-fare competition and growing load factors have driven the trend, Savannah Airport director of air service development Bob Uhrich said. "Our biggest problem is, if you look at those top 100 airports, 96 or 97 of them have a low-cost carrier, and we don't," Uhrich said. "That's the biggest obstacle we face right now. There's no one to keep the legacy carriers in line. Based on reduction in seat availability, our load factors are going through the roof, and to get those last seats you're paying through the nose."

The airport continues work to attract a low-cost competitor, though through the first half of this year, those efforts have yet to yield the desired outcome. "When the first-quarter report comes out, compared to the top 100 airports, you're going to see us in the top one, two or three again," Uhrich said.

Burlington, Vt.—At an airport as small as Burlington International, sometimes all it takes is one carrier and one route to change the overall fare picture. In late May of 2008, AirTran Airways brought what it deemed "low-fare" service to the city in the form of three daily nonstops to Baltimore. During AirTran's tenure at the airport, the average fare out of Burlington dropped from $370 to $315, according to BTS. However, fares quickly spiked back at the end of 2009 to $353, following the airline's September 2009 departure from the city. The airport, however, has maintained the services of JetBlue Airways. Following Moody's Investors Service's downgrade of the airport's credit rating last month, airport director Brian Searles in a statement said the competitive landscape is improving.

"While 2009 was undoubtedly a tough year for Burlington as well as airports across the country, the travel hubs we rely upon have begun growing their business this year, and we anticipate a corresponding return to greater passenger numbers here," Searles said. "In the last two months, we are seeing passenger increases which have resulted in numbers that are equivalent to those when AirTran was operating in Burlington."

Atlantic City, N.J.—Atlantic City's average $190 airfare was the lowest among all 100 airports in the country in the fourth quarter. Still, since it jumped by 3.2 percent jump from fourth-quarter 2008's $184, the average airfare was enough to place it among the biggest airfare spikes in the nation. According to Seaney, Atlantic City data in the BTS reports are always a little off. "They have hardly any lift, except for Spirit Airlines to Florida," Seaney said of Atlantic City. "The problem is Spirit doesn't file their stuff correctly with BTS, so it's either the lowest or the highest in the nation every time they put out this report."

LARGEST DECREASES

Cincinnati—For years, Cincinnati topped the Bureau of Transportation Statistics' index as the most expensive city in the country to originate a domestic trip. Now, it leads airports by the magnitude of its fare decreases. For years, such airports as Dayton International, 78 miles away, Louisville International, 102 miles away, and Indianapolis International, 120 miles away, were the beneficiaries of passengers that were seeking refuge from high Cincinnati airfares. Delta in February 2009 overhauled its fare structure out of the Cincinnati airport and vowed that it would reduce airfares, some by as much as 60 percent, compared with January 2009 fares. FareCompare's Seaney said the carrier largely has made good on those plans, and BTS data back that up.

Milwaukee—Southwest Airlines last November launched 12 daily departures from Milwaukee—three apiece to Baltimore and Kansas City, two to Las Vegas and one apiece to Phoenix and Tampa. Milwaukee already had been an incubator for low fares as the host city for a battle for local traffic between an aggressive AirTran and hometown carrier Midwest Airlines. AirTran last year increased its Milwaukee capacity by 40 percent through a combination of frequency growth and service to new markets, including Minneapolis, St. Louis, Branson, Mo., and seasonal flights to Denver. Upon launch, Tad Hutcheson, AirTran vice president of marketing and sales, said, "We see enormous potential in Milwaukee. This increase in service underscores our commitment to growth in the market. With the addition of AirTran Airways' new flights, Milwaukeeans can expect to see fares drop as much as 60 percent on these routes, and we are confident that residents will continue responding to our lower fares to more destinations." Capacity remains up. OAG shows Milwaukee with about 17 percent more available seat miles this month than a year ago.

Minneapolis/St. Paul—Southwest launched service at the Minneapolis/St. Paul airport in March 2009, and now provides three flights to Denver, two daily St. Louis nonstops and eight daily nonstops to Chicago Midway. "Minneapolis is a relatively new Southwest market," Seaney said. "Minneapolis-to-Chicago fares were averaging three or four times higher before Southwest came in, so that probably brought down the average."