Meeting News - March 9, 2009 - (Page 19)

Edited by Terri Hardin terri.hardin@nielsen.com Transportation & Services routes result in little reduction in fare prices, Bejar said, despite cheaper oil. For this year and next, “I think American and other airlines are offering great fares in order to fill seats on their planes. While we don’t blame corporations for havCintron.“Rather than see seats go empty, [the airlines] put them on sale. Also, lower fuel prices are not necessarily the prices at which the airlines bought fuel. Some of them hedged; depending on what price they bought fuel at, if they overpaid they have to make up in revenue.” Bejar agreed and pointed out that moving forward, most airlines will be “licking their wounds” when it comes to the fuel-hedging players, many of whom bought fuel contracts at early 2008 prices and were considered “crown geniuses” at the time but didn’t anticipate the extent of the current drop in fuel prices. “They had a good run,” he said. “But now, more than ever, airlines need to shore up their hedging strategies with specifics in mind.” And what about those extra charges? Cintron said that while baggage fees have “angered passengers,” he doesn’t hold out much hope for their demise. Fuel surcharges, however, are another matter. “We’d like to see a lot more transparency on the part of the airlines in regard to fuel surcharges,” he said. “With fuel prices down, passengers aren’t going to stand for them, but airlines may not tell you how or from where they are making these charges.” In plain English, this means that fares are not likely to go lower, and if they do, they will because of low planeloads, not lower fuel prices. That means meeting participants and other business travelers should consider investing in very good carry-on bags. H —Gretchen Kelly For Stubborn Airfares, ‘Read ’Em and Weep’ Fuel prices have plummeted, but the price to fly remains a letdown for travelers Last summer, when fuel prices skyrocketed, airlines passed part of the cost onto consumers. It ended up in the form of fuel surcharges as well as new add-on fees for previously free services like checked bags. Sixty percent of domestic airlines charged a fuel fee, and most of them charged for each checked bag, starting at $15. At the same time, service no longer encompassed previously standard amenities like meals or even bottled water. The “nickel and dime” situation got so bad, consumers joked about the possibility of coin-operated toilets. But in 2009, drastically lower fuel prices (hovering around $40 a barrel at press time) haven’t produced a matching decrease in fuel prices. What gives? “Consumers shouldn’t expect a significant reduction in base fare prices,” said Raphael Bejar, CEO of Airsavings, a group purchasing and ancillary services firm based in Paris. Explained Bejar: “The question is like a double-edged sword. On one hand, fuel prices are around $35 a barrel, versus a record $147 in July 2008. One would imagine that airline profits would increase and airfares would come down. But on the other hand, we’re still seeing capacity cuts as the airlines respond to massive losses from last year and a huge drop in demand for travel—which might be as much as 20 percent over the coming 18 months.” Less passengers flying and fewer airlines will be focusing on their survival and rebuilding their cash reserves for long-term stability,” said Bejar. “This becomes an operational imperative for airlines. I should also point out that base fare prices have been virtually the same for the past 10 to 15 years, so there is very little possibility of them going down.” Ned Raynolds, a spokesman for American Airlines, echoed the reasons why airfares and fuel prices won’t go down at the same rate, despite tickets already being cheaper. “The airlines are always farecompetitive, and the decline in jet fuel prices has probably allowed fare competition to take place at a lower price level,” Raynolds said. “Load factors are down, and ing a recession mindset, we think it’s very much in their interest to recognize that now is a great time to book business travel.” Raynolds pointed out that fuel surcharges at American Airlines have been dropped but the airline has to recoup its losses. In the face of already low fares, consumers are unlikely to see more differences in fares even with the fuel surcharge no longer itemized as part of the purchase price. Michael Cintron, director of consumer and travel industry affairs for the International Air Transport Association, agreed that travel demand, not fuel prices, will be the determining driver for airfares going forward. “You see a lot of sales going on and some getting extended,” said www.meetingnews.com March 9, 2009 MeetingNews 19 http://www.meetingnews.com

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Meeting News - March 9, 2009

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