Thursday, March 27, 2008

The Hits Just Keep On Comin' ... (And Other News)

--Looks like domestic passengers on major airlines are about to get hit with another fare hike as the weekly, weekend airfare fandango approaches.

The latest attempt to hike fares and make them stick among the six legacy carriers was initiated today by Delta.

"After last week’s attempted hike failed, [Delta] persists this week, trying again by adding an additional $10 round-trip fuel surcharge systemwide," said Rick Seaney, the CEO of

"This marks the sixth airfare increase attempt in the past five consecutive weeks, and the tenth attempted increases so far in 2008," he said. Five of those increases have stuck.

"Last week United was quick to match Delta, but the other legacy airlines stood on the sidelines for a few days and forced a rollback by both," said Seaney. He said he expects United to match the new increase, and that United and Delta would then "hope to drag along the other four legacy airlines over the weekend."

So far, I haven't seen any evidence that soaring fares have affected passenger demand, even as the summer peak travel seasons approaches. The convention wisdom is that demand will begin to soften in April, including business-travel demand, but we'll see.

Seaney agreed. "I continue to get mixed messages from a variety of sources on travel demand for the next few months. From all accounts bookings look to be strong, and typically late spring and early summer are strong -- which could support “even” more increases, but I also continue to hear more than the normal amount of rumbling about business demand waning slightly.

Still, as the fare-hike hits keep on coming, comparisons with previous periods are difficult. "We are in completely uncharted waters right now," Seaney said.

Meanwhile, in a phone interview, Seaney -- who along with Tom Parsons of follows these mind-bogglingly complex fare structures carefully -- pointed out that there is a difference between a fare hike and a fuel surcharge. So far, he said, about half of the across-the-board increases or attempted increases this year have been filed as fuel surcharges.

To most of us, the difference is nil. But if you're a big corporate travel manager, you probably have negotiated fare discounts with one or more airlines. There's where the difference can be important, because under most agreements, fuel surcharges are added onto the bill after the discount. Fare increases, on the other hand, are usually subject to the negotiated discount.

Typically, he said, though contracts can vary, "you only get the discount off the base fare.” When your employees are the ones "buying those $1,000 tickets," the difference mounts up, he said.

On the other hand, calling an increase a fuel surcharge "gives some notion of its being temporary" and thus some perceived marketing advantage, he said. "Right now the fuel surcharge is around $40 or $50 for most city pairs, though some don’t have it on routes competing with carriers like Southwest, which are fuel hedged."

Internationally, fuel surcharges have crept up to the $200 to $300 level on many routes, by the way.

One dynamic Seaney sees affecting demand:

"The real issue will be pretty simple. Most business travelers need to do business face to face, which is the way deals are done," and that fact tends to support demand.

On the other hand, "there is a huge travel economy around consulting businesses -- with major corporations sending people all over the country. During the week, they fly out on Monday and come back on Friday.

"These are the people buying $800 to $1,000 tickets. What might happen is the companies they are consulting for could say, 'Why the hell am I paying $1,000 each for these 20 consultants to come work here all week'. And that will occur if the economy keeps in its present trajectory, when those corporations will say let’s cut discretionary travel spend by 20 percent. That's when we'll see the softening.

"That's the airlines' biggest fear," Seaney went on. "And when it happens, they're going to ground flights. If the flight is not profitable, or the lowest rung on their schedule, they're just not go to fly it. That will be very bad for consumers who have are used to basically walking down to the nearest airport and going wherever they want for a relatively cheap price."


In Other News ...

---Delta Air Lines became the third carrier to add a charge for a second checked bag, following United and US Airways. Starting May 1, it'll cost an extra $25 for a second checked bag on Delta. American is expected to follow imminently. After that, the other major competitors will likely also get on board.

(By the way, I caught hell from business travelers after I said a week or two ago that generally the only people who check a second bag are the "Clampett Family." Oh yeah? What about golfers and skiiers, several readers said. And families, and those of us who have to lug equipment or pack for three weeks? And so on. Sorry, I was way too glib on that one.)


---I never worked in PR, but I do know this is a basic rule: Don't go prattling on too much. You could end up as a snippet of video on, like, the Daily Show, and they won't be laughing with you ...

For example, TSA spokesman Dwayne Baird hereby wins the Quote of the Week award (no use even going through Friday; no one will top this) with the following utterance as quoted today by the Associated Press:

''I'd be really curious to know what this woman had in her nipples," Baird said. "Sometimes they have a chain between their nipples, or a chain between their nipples and their belly button. ..."

Here's the issue he was addressing.


---David Neeleman, the founder of JetBlue who basically faded away after the Valentine's Day 2007 fiasco in which thousands of JetBlue passengers were stranded for four to eight hours on idled planes at Kennedy, announced plans to start a new airline modeled after JetBlue -- in Brazil, the land of troubled skies, but also the land of a vastly underserved air-travel market.

Neeleman said today he's looking for a name for the snazzy startup.

Oh, I dunno, given the horrible disasters Brazilian airlines Gol and TAM had in late 2006 and last year, how about: "NoCrash Airways?" ... Oh jeez, there I go again ...


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