Airlines offering sales on fares as they compete for travelers’ business
It’s not quite a price war, but a string of promotions highlights the airline industry’s increasing competition for travelers’ business.
If you’ve been paying close attention the last few weeks, you’ve had a good shot at a deal on a plane ticket — say, $38 from Los Angeles to Las Vegas or $49 from Washington to Indianapolis.
At least three airlines have offered fire sales on fares recently, with one-way tickets on some routes dropping under $50. Southwest, JetBlue and Virgin have all promoted bargain-basement prices this month.
The fare-tracking company Hopper recorded sales of at least 20% off in more than 2,400 markets in September, more than any other month in the last year. This month, it expects to see nearly 1,700.
It’s not quite a price war, but the string of promotions highlights the airline industry’s increasing competition for travelers’ business.
For months, ticket prices held steady even though plummeting oil prices slashed airline expenses. But over the last few months, airfares have started to fall.
The average price of a ticket in September was about 6% cheaper than a year earlier, according to the federal Consumer Price Index and the industry trade group Airlines for America.
And ticket prices are expected to keep falling through at least January, after the holiday travel season ends, said Patrick Surry, chief data scientist at Hopper.
That’s largely because of stepped-up competition from low-cost carriers like Spirit and Frontier, analysts say. Those airlines that own a smaller slice of the market but make up a big chunk of the industry’s growth.
The U.S.’ fastest-growing airlines all promise low-cost, no-frills flights. Spirit Airlines has increased its seat capacity more than 30% this year, Frontier Airlines more than 20% and Allegiant Air more than 15%, according to Airlines for America, an airline trade group. Meantime, the industry has averaged 5.1% growth.
That has put pressure on established airlines, which have resisted adding routes or cutting prices despite cheap oil and handsome profits. American Airlines President Scott Kirby said last week that his company would start offering cheaper, stripped-down service next year in an effort to compete.
“Those carriers are relevant, and we have many customers who are willing to fly them,” Kirby told investors. “We have to compete for them. We can’t just walk away from that side of the business.”
The ramped-up competition comes after stubbornly high airfares drew the attention of federal investigators. The Justice Department started investigating the nation’s four largest airlines this summer for potentially colluding to limit their growth — and keep prices high.
“Competition is alive and well in the airline industry,” Airlines for America spokeswoman Melanie Hinton said. “A more stable industry environment has allowed U.S. airlines to grow.”
The effect the low-cost carriers play isn’t always obvious. They don’t offer the sprawling hub-and-spoke systems the big players do, but their impact spreads past the airports they fly from. Prices in Greensboro, N.C., for example, have been pushed down by low-cost service in Raleigh, an hour’s drive away, Kirby said.
Still, dropping ticket prices haven’t squeezed airlines too tight, said Bob Mann, who runs the airline consulting firm R.W. Mann & Co.
Although airfares are down about 6%, jet fuel is down even more — about 45%, according to the U.S. Energy Information Administration. And fuel usually accounts for about a third of the cost of running an airline.
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The increasing competition is raising challenges for airlines as their soaring profits hit new head winds.
Spirit Chief Executive Ben Baldanza said Tuesday that his airline could wind up with lower profits because of lower fares. The airline’s average ticket price fell 13% in its latest quarter, he said, even as its profit jumped 45% for the year.
“In some of our markets, we continue to see very low prices from all competitors, including legacies,” Baldanza told investors. “We think that may continue, perhaps for longer than people expect.”
Moore is a freelance writer for the Washington Post.
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