The skies were not friendly to travelers in 2006. And while they haven't been much kinder so far in 2007, some positive developments are in the air.
Coming off a year of airline bankruptcies, slashed domestic routes, and airfares skyrocketing 10 percent to 18 percent, this year will show slight improvements. But capacity remains 18 percent to 20 percent less than pre-2001, and airfares are still expected to rise 3 percent to 5 percent this year — depending on fuel prices.
Plus there's a good chance of yet another industry shake-up, as rumors of airline mergers began buzzing back in November.
Here's a look at where the airlines are headed and what it means for you.
Where the Flights Are
According to Air Transport Association data, available seat miles — a measure of seating capacity or airlift — will increase 1.1 percent for domestic flights and 2 percent overall (including international flights) by the end of 2007. Among all U.S. airports, the projected increases are 1.4 percent domestic and 2.1 percent international. International routes are benefiting from the fact that airlines are using their larger jets for the more lucrative overseas flights and their smaller planes for domestic routes, says Jack Keady, president, Keady Transportation Consulting, Playa del Ray, Calif.
Seating capacity will increase at 33 of the 50 largest U.S. airports, including West Palm Beach, Fort Lauderdale, Fort Myers, and Tampa, Fla.; Washington Dulles; Austin Bergstrom and Houston; Chicago Midway; Charlotte and Raleigh-Durham, N.C.; Atlanta; JFK in New York; Nashville, Tenn.; and Indianapolis — all of which anticipate gains of more than 5 percent. Also, a 27 percent increase is expected in New Orleans, which saw airlift severely cut back last year because of Hurricane Katrina.
Memphis, Tenn.; Cincinnati; San Jose, Calif.; Pittsburgh; Anchorage, Alaska; and Dallas/Fort Worth are among the destinations seeing declines in seating capacity.
“This is about following the revenue; that's where we're scheduling to,” says John Heimlich, chief economist at ATA, which represents the airline industry. “Airlines schedule principally to demand. Profitability is going to be the principal attraction to enter a market or expand one's presence in a market,” he says.
Some airports, however, lost seat capacity more because of route restructuring caused by airline bankruptcies than as a result of lack of demand. Pittsburgh is one example. The city lost hub status with US Airways after the carrier merged with America West last year, but it was a blessing in disguise, says Joseph McGrath, president and chief executive officer of Visit Pittsburgh. The downside of being a hub, says McGrath, is that the airport is dominated by one carrier, which limits competition. Now, low-cost carriers Southwest Airlines and JetBlue have added service to the city.
While seating capacity will shrink by 3.4 percent in 2007, Pittsburgh's airport still serves 28 of the top 30 destinations with direct flights. And meeting business has actually picked up since the hub was eliminated in 2005, says McGrath.
As legacy carriers restructure, merge, and expand service into international markets, low-cost carriers such as Southwest, AirTran, and JetBlue are filling the void left in major markets. “You've seen carriers like Southwest enter markets that they have traditionally shied away from — the generally more expensive, high-profile, metropolitan airports like Washington (Dulles), Denver, and Philadelphia,” says Heimlich. “That's a fairly recent trend.”
Despite the fact that demand is high, fares will be kept in check this year (3 percent to 5 percent) because the low-cost carriers are creating stiff competition in big markets and because fuel prices have stabilized, states Keady.
The Airlift Factor
For planners concerned about rates, the problem is that hotel rates and airlift are rarely in sync at a given destination. First-tier cities typically have great airlift, but they don't have affordable hotel prices. That's why smaller airports in second-tier cities that have good airlift can be a boon to the convention business. Just ask Roy Benear, senior vice president at the Austin Convention & Visitors Bureau. “When you get past those big hub cities to cities the size of Austin, lift becomes a big issue,” says Benear, because groups don't want to spend all day getting to a destination.
The Austin-Bergstrom Airport has helped, not hindered, the city's efforts to attract meetings. “It [the airport] has been a tremendous asset for us,” says Benear, citing its ranking among the best airports in the country by J.D. Power and Associates. With a projected increase of 7.6 percent in available seat miles, the airport is one of the five biggest movers for 2007 after an 8 percent seat mile growth in 2006. The increase in seat miles seems to go hand in hand with the demand that the city is getting from groups and leisure travelers and the significant hotel development that is in the pipeline, explains Benear.
Planners also appreciate second-tier destinations with multiple fly-in options. Long Beach, Calif., is one example of a second-tier city that is accessible because three airports — Los Angeles International Airport, Long Beach Airport, and Orange County Airport — are all within a short drive.
Among top-tier cities, planners cite Orlando as an accessible and affordable destination. Because of the volume of leisure travelers, it not only has good airlift, but also a range of price points in hotels — luxury to economy — to serve a lot of different groups.
McCarran International Airport in Las Vegas is lauded as another top-notch facility, says Keady. But while airlift is not a problem for Las Vegas, capacity could be in the near future. Tourism and meetings are growing so fast in Las Vegas that there is concern that the airport might not be able to keep up with the growth before the new airport is built, says Keady. “But so far, it's a very workable airport.” (A new airport is slated to open in 2017 to supplement McCarran.)
Pittsburgh, Phoenix, Seattle, Cincinnati, and Kansas City, Mo., are other second-tier destinations cited by meeting planners as having good airlift. Planners recommend looking at cities that low-cost carriers fly to as a guide to help determine which second-tier cities might have good lift.
The wild card that could throw the industry off is airline mergers. Late last year, rumors were swirling about two major mergers — US Airways-Delta and United-Continental. Whether they will happen is a big “if,” says Keady. “The clearest thing you can say is that it's a murky picture.” US Air and Delta will probably fall apart, he says, and United and Continental is anything but a sure thing. “United and Continental talking to each other is an act of desperation.”
Even if a merger does happen, it probably will not affect travelers this year because of the time it takes to integrate airlines.
Many planners don't dwell on the swirl of rumors. In the rapidly changing world of airlines, anticipating what is going to happen for a meeting several years out is impossible. The major meeting destinations such as Orlando, Las Vegas, Atlanta, San Francisco, Washington, D.C., and Chicago probably will not be affected, because if a carrier drops out, another airline will likely move in, says Keady. However, some smaller cities will suffer a net reduction in routes if a merger occurs, which could pose problems for groups.
Stuck in the Middle
While capacity is expected to inch higher in 2007, it's far from where it was a few years ago. “We're back to full passenger volume, similar to where we were before 9/11,” says Dean Headley,associate at the National Institute for Aviation Research at Wichita State University and co-author of the Airline Quality Report. “We also have about 18 percent to 20 percent less seat capacity in the system now as compared to pre-2001,” he adds. “It's a very complex system with high volume, and it doesn't hold up well to the pressure.”
Combine lower capacity with an increase in demand and an industry looking to maximize profits after some lean years without drastically raising rates, and it adds up to full flights.
“All airlines are trying to fill their seats and get rid of any excess, so we see a harder time finding seats regardless of which destination we're going to,” says Carroll. Chances are, if you book last-minute, you'll be sandwiched in the middle seat. And you might pay more. Planners say those last-minute deals that travelers were accustomed to getting the past few years are hard to come by because planes are running so full.
So, experts say, when you see a good price, book it.
Adding Seats, Subtracting Seats
Airports with the highest projected percentage increase in available seats in 2007:
- SW Florida (Fort Myers) International (RSW)
- Palm Beach International (PBI)
- Charlotte Douglas International (CLT)
- Chicago Midway (MDW)
- Tampa International (TPA)
- Dulles International (IAD)
- Austin/Bergstrom International (AUS)
- Houston William P. Hobby (HOU)
- Raleigh-Durham International (RDU)
- Fort Lauderdale/Hollywood International (FLL)
Airports with the highest projected percentage decrease in available seats in 2007:
- Kahului (Maui) Airport (OGG)
- Chicago O'Hare International Airport (ORD)
- Cleveland Hopkins International Airport (CLE)
- Sea-Tac (Seattle) International Airport (SEA)
- Pittsburgh International (PIT)
- Memphis International (MEM)
- Anchorage International (ANC)
- San Jose International (SJC)
- Dallas/Fort Worth International (DFW)
- George Bush Houston International Airport (IAH)
SOURCE: Air Transport Association
Fares Flying North
Average airfare in 2005: $216
Average airfare in 2006: $231
Average international fare in 2005: $1,604
Average international fare in 2006: $1,707
SOURCE: 2006 Business Travel Monitor