Tax Returns, Airlines Up Fares

Following the return of the 10 percent ticket tax on March 7 and the ensuing fare battle over the next few days, major airlines for the most part settled on a 4 percent increase in fares, absorbing 6 percent of the cost of the tax.

Observers said, however, that carriers will likely sneak in a couple of increases over the next few months.

"I guarantee that sometime in the next 30 to 60 days, the airlines will try to get that 6 percent back," said Terry Trippler, editor of Minneapolis-based Airfare Report. "I'd be surprised if we don't see suddenly one day a $5 or $10 increase on one-way walkups."

Best Fares editor Tom Parsons agreed. "Don't even consider that this fare hike is the last one we will see in 1997," he said. "During the next few months, the airlines will slowly start sneaking in small across-the-board fare hikes of 2 or 3 percent until they recover the 6 percent they failed to get on March 7. They're going to go for even more."

These anticipated increases would be in addition to what American Express reported in last month's airfare index would be a 25 percent increase from January 1996 to January 1997, in published fares generally available to business travelers in 215 domestic city pairs. January's one-way average fare was $410--the highest average ever recorded for the "typical business" category, which American Express began tracking in January 1992.

According to the index, January's typical business fares jumped even higher year-over-year for sample city pairs in some markets: 74 percent in Salt Lake City, 63 percent in Raleigh-Durham, 56 percent in Denver, 41 percent in Atlanta, 40 percent in Tampa, 37 percent in Newark and 31 percent in Dallas, among others.

"Last year's business airfare hikes, plus an expected year-over-year average rise of 8 to 9 percent in typical business fares for 1997, make it urgent for companies to control travel spending," said Ed Gilligan, president of American Express Corporate Services.

John Heilner, a consultant at Stamford, Conn.-based Management Alternatives, said his company is urging clients to "take a stronger stand and for major city pairs, and try to get a locked-in fare rather than a percentage off."

Airlines rarely go for such a deal, as evidenced by their near-universal refusal to participate in the Business Travel Contractors Corp. Short of a change in negotiations that fixes contract fares, corporations have dim prospects for reducing air expenditures anytime soon.

"The fare discipline resulting from overcapacity that we saw in the early 1990s just isn't there anymore," said Vivian Lee, an airline analyst for Bankers Trust. "We're looking at a level of price stability the industry has never known. The only solution for buyers is to plan ahead.