THE TURBULENT TRAVEL INDUSTRY : Passengers Are the Winners in Fare Wars : Airlines: A summer full of packed planes isn’t enough to offset losses from series of deep discounts on tickets.
This has been a summer the airlines would rather soon forget. But it won’t be easy.
After waging a series of air fare wars since late May, the airlines have little to show for it except massive losses, overworked employees and disgruntled business passengers.
The constant promotions that were offered this summer--including a 50%-off sale--only reinforced the flying public’s habit of waiting for the next sale before buying, hampering industry efforts to boost ticket prices. In fact, the airlines have postponed until next week price hikes that were scheduled to begin today.
“The customer won,” said Harold Sirkin, a transportation specialist at the Boston Consulting Group. But “in terms of the airline industry, I’m not sure there were any benefits.”
For the weary airline industry, the hectic summer of 1992 will come to a close on Sept. 13, when the last of the estimated 40 million passengers who traveled on deeply discounted tickets pick up their bags and go home. The traveling hordes tied up airline and travel agent switchboards, swarmed airports and jammed themselves into nearly every available airplane seat this summer.
The discounts were so deep that the airlines could not make any money on the sale seats. As a result, the industry is expected to post a loss during the current third quarter for the first time ever.
Auto rental companies perhaps reaped the biggest windfall from the surge in travel as airline passengers reserved cars at airports. “The airlines did all the work for them,” said James Cammisa, publisher of Travel Industry Indicators, a research and travel trend newsletter.
More than 70% of Americans have already flown on a plane at least once, so the sales did little to expose more people to flying. The promotions also attracted many people who had already planned to buy tickets later in the summer or the fall, travel industry analysts said.
“A good deal of the business was borrowed from later in the year,” Cammisa said. “People only have a limited amount of available vacation time and money to spend.”
Subsequent sales failed to generate as much enthusiasm as the 50%-off promotion earlier this summer. In fact, many travel officials said the multiple sales only generated confusion.
“Even the most experienced business traveler and frequent leisure traveler is really confused by it,” said Jim M. Roberts, president of Uniglobe Regency Travel in Rancho Cucamonga. “They are just buying a ticket and banking on the fact that if there is another sale, the airline will give them the lower fare.”
The sales have come and gone so quickly that it’s been hard even for the airlines to keep up. When Roberts called Delta Air Lines to inquire about a fall fare sale the carrier had just announced, an employee responded: “What do you mean we have a sale going on?”
In the long run, the 50% discounts may have set up some unrealistic expectations among consumers about the cost of airplane travel. During that sale, the price of a coast-to-coast round-trip ticket fell to $200. The normal sale price is now more than twice that amount.
“A lot of people in the industry are worried,” Cammisa said. “The fear is that you condition the consumer to buy only when there is a sale on.”
“Some people may now feel that if it costs more than $99 to go one way it’s not a good deal,” said Thomas Nulty, president of Santa Ana-based Associated Travel Management.
Leisure and vacation travelers enjoyed most of the savings from the air fare wars. Business travelers, however, got caught in the cross-fire. The fares most often paid by business fliers have remained stable or have actually risen in a few markets this summer. Meanwhile, business passengers were trapped in crowded airports and airplanes swarming with discount fliers.
That has resulted in higher levels of frustration among business passengers, said Sirkin. “The business travelers have been getting a lot more middle seats, and it’s been hard to get reservations because the planes have been oversold,” he said. “It will have an impact on business traveler loyalty.”
After a summer of turmoil, they hope to return to peace and profitability through fare hikes. But those increases may not stick for long in the face of a sluggish economy and a glut of airline seats, industry analysts said.
“If I was more cynical, I would think that people are raising fares so they would have more room to discount from,” said Donald S. Garvett, an airline pricing expert at Simat, Helliesen & Eichner, an aviation industry consulting firm.
But the airlines have little choice but to try and bump fares up, said Philip C. Wolf, president of Travelmation, an air fare tracking firm in Stamford, Conn.
“It’s a risk that they have to take because they can’t afford to keep the prices they have now,” Wolf said.
