Airline fees changing vacation plans?
October 23, 2008
Joe Skier wants to fly his family to the mountains for a ski vacation and has surfed the Web until he found airline fares he can afford. But then he calculates the costs for each family member’s suitcases, boot bags and ski bags. It’s nearly $200 per person, adding another $800 to the trip for a family of four.
“Will anybody be able to afford it with all the fees tacked on?” questioned Mike Boyd, co-founder of The Boyd Group, a company that focuses on consulting, research and analysis of aviation trends. “If I buy a ticket, I should have the reasonable expectation of being able to bring my underwear.”
Yet, window seats are selling for $10, a cup of water goes for $2 on some airlines, and the surcharges are not going away.
“Now, a fare is just a down payment,” Boyd told resort industry professionals participating in a webinar on “Year 2008 Airline Industry: Revolutionary Change,” presented by the Mountain Travel Symposium.
With surcharges becoming the norm, winter resort destinations might need to take a look at creative ways for their customers to bring their gear, such as shipping skis through FedEx or DHL, he said.
The surcharges are just one way the airline industry is looking for additional per-seat revenues, as it reels from the cost of oil.
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“No airline flying today was structured to fly at $50 a barrel, much less $100 a barrel,” Boyd said.
The result is a shrinking industry – in revenue, passengers, markets and planes – in all areas but the cost of fares. Boyd predicts that the industry’s 6,300 jets will decrease to 6,000 or fewer by the end of 2009. Also, as smaller regional jets are retired, service such as Salem, Ore., to Salt Lake City will be gone, he said.
“Don’t expect any real service to South Lake Tahoe; those days are gone,” Boyd said.
The comprehensive network carriers, such as United or American, are trimming routes – for example, seven flights from Chicago to Denver instead of eight flights per day.
However, not all the airline industry changes will hurt mountain ski resorts, and mountain destinations could fare better than places such as Las Vegas or Florida.
“The airlines aren’t interested in more passengers, just more money per passenger,” Boyd said.
That affects markets such as Orlando, Fla., or Las Vegas because the passengers those destinations attract are much more price sensitive than mountain ski resorts.
“Deer Valley, Aspen, Vail … this is not Vegas, and the clientele that go there are not Vegas,” Boyd said.
Boyd explained that the through yield (revenue per passenger mile) from New York to Aspen could be 15 cents to 18 cents, while that revenue is 9 cents to Florida and 5 cents to 6 cents to Hawaii. If the airlines make more money flying to Aspen, that market will be continued for the airline, he said.
In fact, travel to Aspen by airline is up 2 percent to 2 1/2 percent January 2009 over January 2008, but it is a different mix of passengers since now there is no service from Phoenix, but there is service from Atlanta, he said.
The amount of time it takes to fly to a destination also will be a factor for mountain resorts (less is better), as well as if they are serviced by the declining number of regional jets or by one of the comprehensive network carriers or low-cost carriers such as Southwest and Frontier.
As the airline industry changes, destinations might have to consider minimum revenue guarantees for airline service as a cost of doing business, just like advertising costs.
“If I’m an airline and you’re going to pay me, I’ll stay,” Boyd said.