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It's True: Air Fares Are Down 24 Percent From 2000

Posted on: Monday, 26 September 2005, 18:00 CDT

By Dan Fitzpatrick, Pittsburgh Post-Gazette

Sep. 26--Local airline passengers can no longer complain about having to pay abnormally high ticket prices out of Pittsburgh.

It's just not true -- anymore.

One-way tickets on the 25 most popular routes out of Pittsburgh International Airport are 24 percent lower in price than they were in 2000, according to an analysis of U.S. Department of Transportation figures.

The average fare dropped from $179 in the first quarter of 2000 to $135 in the first quarter of 2005 -- and that's before the arrival of the industry's most profitable discounter, Southwest Airlines, whose competition tends to drive fares even lower.

Surprisingly, fares fell at a faster clip locally, 24 percent, than nationally, 11.8 percent, during the five-year period -- reflecting how high the prices were when US Airways controlled almost 90 percent of all traffic at the airport and charged monopoly-like prices. It now accounts for less than 60 percent of the passengers who go through the airport.

As much as the big pullback in local service by US Airways, which has slashed its number of local flights by more than half, the plunge in fares reflects the upheaval of the U.S. airline industry since the 9/11 terrorist attacks. Old-line carriers such as US Airways have been forced to retrench in the face of huge losses, their dominance increasingly challenged by expanding discount airlines that now represent some 30 percent of all domestic traffic.

These forces, and the ease with which consumers and businesses can shop the Internet for the best fares, have conspired to force older carriers to slash prices simply to retain passengers. In Pittsburgh, for example, new competition and pricing pressure has come from Southwest, AirTran Airways, America West Airlines, Independence Air and USA 3000.

As a result, the average one-way fare on the top 25 routes out of Pittsburgh is now only $3 higher than the national average; five years ago, it was $30 higher.

"These numbers show the power of competition and how it improves conditions for air travelers," said Ken Zapinski, staff director of the Regional Air Service Partnership, a public-private group dedicated to local air service issues.

But while Pittsburghers, finally, are getting what they want -- lower air fares -- the benefits haven't come without costs.

Thousands of jobs have been cut by US Airways, which also took the paring knife to local flights, eliminating direct connections to a number of cities in the United States and overseas.

Through two bankruptcies, the nation's seventh-largest carrier has eliminated more than 9,000 local employees, leaving 3,500, and more than 300 local flights, including all direct connections to Europe -- all while stripping Pittsburgh of its hub status.

"We had a lot of benefits with the hub when US Airways was here and a lot more employment in the area and a lot more immediate destinations," said Allegheny County Airport Authority Executive Director Kent George. "However, what we have now is a benefit to both the business and the discretionary traveler that is saving a tremendous amount of money because of competition and a lower overall fare."

As painful as it was for local airline workers asked to accept deep cuts in pay and benefits, the plight of US Airways made it possible for fares to come down and for competitors to add new service.

Southwest Chief Executive Officer Gary Kelly admitted as much earlier this year, saying that Pittsburgh rose to the top of his list after US Airways pulled back hundreds of flights. He promised that people in the Pittsburgh area "will benefit from substantially lower fares than they have been used to."

But fares were already much lower before Southwest arrived in May.

During a five-year period ending early in 2005, prices went down in 21 of the 25 top markets out of Pittsburgh. The only four routes to increase in price were Boston, New York's LaGuardia Airport, Philadelphia and Minneapolis.

What those so-called city pairs -- Pittsburgh paired with Boston, for example -- had in common was little competition. US Airways is still the only carrier serving Boston's Logan Airport and New York's LaGuardia Airport out of Pittsburgh.

Also, the 25 percent jump in the average fare from Pittsburgh to Philadelphia -- to $216 one-way from $173 -- over the five-year span does not account for the decision by Southwest to start Pittsburgh-Philadelphia service last May, challenging a route that US Airways long had all to itself.

Today, the lowest one-way fare from Pittsburgh to Philadelphia is $49. That shift in Philadelphia will show up in the U.S. Department of Transportation's second-quarter figures, due out next month, perhaps lowering Pittsburgh's overall fares further.

Many of the popular routes out of Pittsburgh are now served by several carriers -- a trend that accounts for double-digit decreases in ticket prices.

Prices in San Francisco and Los Angeles are down 40 percent and 33 percent due to competition on those routes from America West, which connects passengers to California through its Phoenix hub and is merging with US Airways. Local officials are confident the West Coast fares will remain affordable once the union becomes official on Tuesday as US Airways exits Chapter 11.

AirTran, another US Airways low-cost rival, now serves Orlando, Fla., Atlanta and Fort Lauderdale, Fla. Prices on those routes dropped 28, 51 and 24 percent, respectively, between 2000 and 2005.

AirTran also put pressure on the price charged to New Orleans, where fares dropped 28 percent between 2000 and 2005. US Airways is still the only carrier that flies to New Orleans nonstop, but AirTran can connect passengers to that city via Atlanta.

"If there is a low-cost convenient connecting alternative, then the airline flying the nonstop doesn't have monopoly pricing power," said Zapinski, who is also vice president at the Allegheny Conference on Community Development.

"If the prices go too high, passengers will trade off the greater inconvenience of the connection for the lower ticket price. So, even when US Airways was the sole nonstop flyer to New Orleans, it had to remain competitive with what AirTran was charging to fly there connecting through Atlanta," he said.

Airline observers do not see this trend changing, even though carriers have been trying, successfully to some extent, to nudge up fares in the face of higher fuel costs. If anything, prices should continue to fall as the industry works through its many problems.

Northwest Airlines and Delta Air Lines recently filed for bankruptcy protection, joining US Airways and United Airlines. The restructuring of the older, larger carriers will lower costs and allow more airlines to compete with the lower prices offered by Southwest, JetBlue Airways and AirTran.

"There is no turning back the clock," said Eric Ford, a former director of domestic pricing for US Airways and now a managing consultant with Eclat Consulting in Virginia.

In Pittsburgh, Southwest already serves four cities and is adding two more -- Phoenix and Tampa, Fla. Of the four cities it serves currently, Philadelphia, Chicago and Orlando, all were lower in price as of mid-September when compared to the same period a year ago, according to fare watcher Terry Trippler of Cheapseats.com.

Local fares could drop further if the airport is able to land JetBlue, the hottest of the new low-cost carriers.

George, the airport authority director, said earlier this year that JetBlue could start service in late 2005 or early 2006.

Asked again about JetBlue last week, George would not comment, other than to say that "JetBlue is out there, and I hope they come."

George also hopes the new US Airways, after merging with America West, will add service from Pittsburgh while keeping fares low.

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Copyright (c) 2005, Pittsburgh Post-Gazette

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Source: Pittsburgh Post-Gazette

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