Posted by Seth Miller on August 15, 2012 under News | 
After seeing the pilots soundly reject the most recent contract put to a vote American Airlines turned to the courts to discover their future. By failing to achieve a negotiated agreement both sides were left to rely on the Court to decide if the company could reject the existing contracts and impose a new term sheet on the union. Historically the companies have mostly been successful in these claims so it was quite a surprise when the ruling (warning: 111 page PDF!) came out late Wednesday afternoon with this line:
…[T]he Court finds that American has not shown that the proposal is necessary as required by Section 1113. For the reasons set forth above, therefore, American’s Motion to reject the collective bargaining agreements of the APA is denied.
Yup, the pilots won. Sortof.
It turns out that of the many changes the company is seeking to implement, some more significant than others, only two were rejected by the Court. And of the two, one is quite unlikely to actually have any impact on the pilots anyways. The Court has also given the company three days to file an amended proposal, one that seems quite likely to actually be approved. So what did the pilots actually win?
Well, for starters, they got the AMR executives to admit as part of their testimony that they weren’t really trying to run the business. Rather, they were
“kick[ing] the can” down the road to permit the Company to “limp along” until sometime in the future when there might be increased demand, a benign fuel environment, and a convergence in American’s labor costs vis-à-vis other carriers.
Nothing like just hoping for the best as a business strategy. Sadly, these executives were well compensated for those "efforts."
The testimony also drew out a couple interesting nuggets with respect to competition in key markets. LCCs have been eating American up in a few areas. The San Francisco-Boston market saw a 60% drop in average fare (courtesy of JetBlue) over a 10 year period prior to American dropping the route. And average fares in the Caribbean and Latin American markets have dropped roughly 9% over the past 14 years, again blamed on LCC competition.
The LCC’s expansion in the Caribbean and Latin American region has hit American particularly hard because a large portion of American’s revenue had traditionally been generated from this region. (Kasper Decl. ¶ 56 (American’s average inflation-adjusted fares to this region have dropped by approximately 9% between 1998 and 2011 notwithstanding a five-fold increase in the price of jet fuel)).
It is not clear if the term "LCC" in this context specifically means JetBlue or if Spirit Air is also included. Either way, American got beat up pretty badly in those markets and responded by essentially closing up shop.
On the topic of regional carriers, the ability of the airline to outsource some operations to subcontractors, the pilots lost pretty badly. American wants to add nearly 200 regional jets in the 80-90 seat range. The company notes that the only way RJs are truly competitive is when they are large enough to offer a premium cabin to appeal to business travelers and to be efficient from a CASM perspective. These flights would be operated by a regional carrier and therefore the union pilots would lose out. American’s proposal would allow more than 800 RJs in the fleet based on the current mainline fleet size. The Court pretty much sided with the company on this one, finding that the American request is "reasonable and necessary when compared to its network competitors."
The two points where the pilots won cover the furlough policy and codesharing abilities.
American attempted to essentially remove all limitations on the ability to furlough pilots. The current contract permits American to furlough up to 2,000 pilots and their reorganization plan calls for only 400 to be affected. Yet the company wants to remove all restrictions on that front. The court was reasonably decisive on this point, noting that, "While American claims to seek more broad furlough authority to address unforeseen emergencies, there appears to be no need to do so…"
The furlough policy also currently permits a more senior pilot to volunteer in place of a junior pilot. In many cases, according to the company, such moves necessitate furloughing both employees because of the work rules in place. The entirety of the proposed furlough policy changes were rejected but the Court. It will be interesting to see if American tries to get this portion revoked without changing the other aspects of the policy or if they walk away from the issue completely.
Regarding codeshares, the ruling was similarly favorable to the pilots and for similar reasons. Currently only Hawaiian Airlines and Alaska Airlines are permitted as codeshare partners domestically and then with significant limits. Essentially the airline asked for carte blanche to change that without demonstrating the necessity for such a dramatic shift in policy. In rejecting the proposal the Court notes that, "American has not established how its codesharing proposal relates to the showing of necessity set forth in its Business Plan. American’s failure to do so is problematic because of the central role the Business Plan plays in this Section 1113 proceeding…."
The other interesting bit in the codeshare section of the document is some insight into the history of codeshares in the US market. The filing recognizes how the other airlines were forced to maintain strong codeshare relationships in order to compete with the American route network: "In 2006, for example, Northwest had codeshare agreements with various carriers on 709 routes, Delta on 400 routes, Continental on 319 routes, US Airways on 276 routes and United on 196 routes." The ruling also recognizes that these airlines generally are more restrictive on codesharing now due to their growth through mergers. Ironically, American’s attempt to grow the use of codesharing to levels similar to their competition is hampered because the competition generally needs fewer codeshares to compete. So just being comparable actually is not sufficient in this case.
Much like the furlough policy, it is not clear just how much American will back down on on this one. Clearly they cannot have unlimited codeshares both domestically and internationally but it will be interesting to see just how much leeway the Court is willing to grant on this front.
Finally, one other interesting stat which came out of the ruling concerns sick leave. According to the data provided to the Court, "in 2011, the average pilot was paid 78.4 hours of sick leave, more than one month’s worth of flying." That’s a lot. I’m not sure if that includes long-term disability combined with short-term bits or other mitigating circumstances but the number does seem rather high.
So, yes, the pilots won on a couple points. But not enough to really be celebrating right now it would seem. Fixing these couple points shouldn’t cost the airline too much and on the other, more significant points the pilots lost pretty badly. I was quite surprised with the initial ruling. After reading the details, however, it doesn’t actually seem all that shocking after all. We’ll see what happens with the amended filing soon enough.
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Posted by Seth Miller on April 2, 2012 under News |
This shouldn’t come as much of a surprise. After all, the company has previously stated that they were looking in to the possibility and that they might do it. Still, seeing it actually happen is news. And the news is that Allegiant will be charging for carry-on bags starting with tickets purchased on April 4, 2012. The company has not published this update to their website listing of fees yet but they have confirmed through a number of sources, including AirlineReporter.com, that the change is coming. They will be posting full details online late Tuesday night when the change actually goes into effect. Similar to Spirit Air the fees will apply to any bag larger than 7″ x 15″ x 16″ and it will be discounted online in advance with the fee at the airport expected to be $35.
With cost increases out-pacing revenue in many cases still (see Pinnacle’s bankruptcy filing this morning as yet another example) the airlines are struggling to find revenue anywhere they can, and bags is an easy target. Plus, bag fees are exempt from some taxes that other costs aren’t so the companies love them even more. Still, they risk frustrating customers with all the add-ons and losing the business in the long run. Then again, with their route network and often offering the only service in some point-to-point markets perhaps they think they can afford it.
This will definitely be another interesting development to watch.
Posted by Seth Miller on March 24, 2012 under Flying, Trip Reports |
I’m sitting in the budget terminal of Singapore’s Changi airport this morning, getting ready to board a flight for a day trip up to Kuala Lampur. There are plenty of reasons I decided to do this as a last minute getaway – mostly because there are some fun airports and airlines to be had – and one of them was because it figured to be a pretty cheap trip.
Pricing out the flights my go-to tool was the website www.utiket.com. It is pretty much a Kayak of SE Asian airlines, scraping their websites and compiling the results, but it also includes the LCCs, which is particularly useful in this part of the world. Even better, it knows about all the LCCs, not just the ones I’ve previously heard of, and it knows alternate airports, too. So when it returned the option to fly on FireFly Airlines to Sultan Abdul Aziz Shah airport in Subang rather than KLIA, I jumped on that opportunity.
The booking for FireFly was a bit of a challenge because I was inside 24 hours from the scheduled departure; they shut down online booking at that point. And the internet connection in my hotel was craptacular so Skype wasn’t working. I took a gamble and just headed out to the airport, booking it as a walk-up fare. The price was the same as what I was quoted via Skype when I sortof was able to chat with them so in the end no complaints there.
For the return I’m booked on Tiger Airways from KLIA back to Singapore. That trip is the one where the pricing got all sorts of wonky. I’ll blame or credit that in large part to the fact that the Tiger Airways website is reasonably modern and functional, able to offer all the up-sells that airlines love for ancillary revenue. The base fare for my ticket is only 33 Malaysian Ringits (about USD$10). No surprise, really, that they are looking to make some extra cash, though some of the methods are less than reasonable to me.
First up, the MYR33 fare advertised excludes MYR32 in taxes and fees. These are real taxes and fees so it isn’t that the airline is hiding additional fare components from the customer, but it is a bit annoying that the numbers are not reflected in the initial quote.
After selecting the flight there are a couple up-sells offered. First up is the ability to switch to a flexible ticket. That would increase my fare about 15x so I’m not interested, but the up-sell is offered.
Next up is the ability to assign a seat in advance. Row 1 costs the most, then rows 2-5, then the rest through the exit row. With basically the whole seat map open I wasn’t worried about it, even though the prices are pretty low.
After passing on the seat assignment charge I got the option to buy pre-boarding service from the airline. Only $5 to get to the front of the line. Once again, I decided to pass.
I was given the option for checked baggage, with various price points depending on the weight of the bag. There was also an option for excess baggage. With this just being a day trip for me up from Singapore that wasn’t an issue so again I passed.
And then I finally got to the check-out screen, where the final price was displayed: MYR85. Huh!?!? Where did the extra MYR20 come from?
Apparently there is a "Convenience fee" for the luxury of booking online with a credit card. I thought that maybe booking at the airport would avoid that (similar to Spirit Air) but at the airport this morning the base fare was triple the online rate and there was still a booking penalty at the airport. And it was more than the CC fee online.
So I did what cam naturally, rolled my eyes and then sat down in the food court to take out my laptop and book the online fare. No sense it wasting an extra $35 on the bargain fare.
Just another fun experience with the random vagaries that are airline pricing models around the world.
Posted by Seth Miller on January 30, 2012 under Flying, News |
I love when our elected representatives decide to speak up and express just how idiotic their thoughts are. I’ve heard a Representative state for the record that she thought Adobe Acrobat should be outlawed, for example, but I’m not so convinced that her view there is more ridiculous than that put forth today by Representative Tom Graves of Georgia. Graves, who represents Georgia’s 9th Congressional District (North of Atlanta, up to the Tennessee, North Carolina and Alabama borders), has announced that he will be introducing legislation which will repeal the DoT rule requiring airlines to list the full price of tickets, including all taxes, when they advertise.
This rule, put forth as part of the DoT’s consumer protection efforts, has come under attack from such legendary consumer advocates as Sprit Airlines, who is complaining the rule violates their first amendment rights because they cannot advertise one number and then charge a completely different number when the customer goes to actually make the purchase. Seems like just the sort of actions that should be protected, right?
The Congressman has a very simple premise for why the rule is bad: It prevents the airlines from indicating what part of the fare is actually the fare and what part is taxes and fees.
The federal government should not be inserting itself in the private sector to limit consumers’ ability to see how much they’re getting taxed. If the American people can’t see these costs clearly, I fear it will be easier these fees and taxes to be raised without their knowledge.
There’s just one problem with this line of thought (two, really, but I’m ignoring that the second line there isn’t a complete sentence): it is completely unfounded in reality. There is absolutely nothing in the rule that prevents the airlines from explaining in excruciating detail how much the taxes are and how much the fare is. There is nothing preventing them from reminding the consumer that there are a dozen or so different taxes and fees on the average airfare and way more on international itineraries. What the rule does, however, is prevent an airline from advertising a $9 fare which cannot be purchased for less than $20, no matter how hard you try. And that’s a good thing for consumers.
Fare listings like these, which are fully compliant with the rules, make it quite clear what the taxes and fees are, without violating the DoT rules:
And, yet, somehow apparently it is actually impossible for the airlines and OTAs to actually publish the information this way, as they are inhibited by the DoT rules. Strange, isn’t it, how they’ve managed to do it anyways??
I understand the complaint that nothing else in the USA is required to be marketed with the all-in price rather than allowing for customers to be surprised at the cash register. Let’s not use the examples of things that are bad for us as citizens as examples of why progress shouldn’t be made. Let’s got the other direction instead. Let’s hold hotels and rental car companies accountable, too. Let’s stop rental car companies from hiding the 50%+ surcharges until the final page of the check-out process. Let’s stop hotels from adding on $15-30 or more, per guest, per night, as a "resort fee" rather than actually including those charges in the fine print. After all, you cannot avoid paying them.
There is nothing wrong with calling attention to the fact that the average airfare has so many taxes associated with it. But pretending that there is some unwritten rule out there which is somehow preventing airlines from actually doing so is just plain lying.
Time to step up and face the facts, Congressman Graves: you’re full of it. Step up and do something that actually helps your constituents rather than lying to them. I’m sure they’ll appreciate it when elections roll around.
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Posted by Seth Miller on January 24, 2012 under Flying, News |
Spirit Airlines is protesting the new fare rules requiring full disclosure of all costs for a flight, claiming that the government is requiring them to hide the taxes from their customers. And they’re doing it in style. Their main homepage now shows this when you visit:
If you click the link offered you get this:
Thanks to the U.S. Department of Transportation’s latest fare rules, Spirit must now HIDE the government’s taxes and fees in your fares.
If the government can hide taxes in your airfares, then they can carry out their hidden agenda and quietly increase their taxes. (Yes, such talks are already underway.)
And if they can do it to the airline industry, what’s next?
As the transparency leader and most consumer-friendly airline, Spirit DOES NOT support this new USDOT mandate. We believe the better form of transparency is to break out costs so customers know exactly what they’re buying.
The scary thing here is that I almost actually agree with them.
It is true that, by requiring the big, final price number to be displayed to the customer the actual tax burden is obfuscated. So they’re not really wrong there. But that obfuscation also prevents all sorts of other fees from being hidden, the sorts of fees that Spirit is famous for. And that’s a good thing.
Plus, at the end of the day, most customers care much less about how much of the fare is for taxes and how much is for the airline. A $300 ticket is a $300 debit on my credit card. Whether the airline keeps $150 or $250 of that doesn’t skew whether I think it is a good price for the trip.
Besides, there is nothing stopping Spirit from showing the full breakdown underneath the all-in price. That way they can continue to be a "transparency leader and most consumer-friendly airline" as they always have.
Posted by Seth Miller on December 28, 2011 under frequent flyer, points |
Yeah, I said it. So did Chris Elliott recently, and perhaps for the only time ever I’m going to mostly defend his point of view on this topic. I think he went too far in suggesting that all customers should walk away wholesale from the programs and that the programs are "corrupt and corrupting" (especially without explaining what he means there). And I disagree that there is a problem with only some passengers enjoying all the benefits of the programs. But there is definitely a large group of folks for whom focusing on the points is absolutely not the smart play.
Sure, collect them if you’re making the transaction anyways, but don’t be too disappointed if they expire (or use a service like GoMiles.com to help prevent them from expiring). And certainly don’t let points drive you to irrational spending decisions, like paying markedly more for the exact same product, just to earn a trivial number of points. That’s foolish even for the folks who can actually benefit from the programs and doubly so for folks who don’t benefit from them.
For the vast majority of travelers there are only two things that matter: price and schedule. And for most of those folks it is only price. Yes, there are significant differences in the way the travel experience will play out depending on which carrier you fly on. The difference between flying from New York City to Ft. Lauderdale on JetBlue or Spirit Air could not be more dramatic for a pair of products that are arguably the same thing, 1000 miles in a coach seat. But at the end of the day, if the Spirit flight is notably less expensive they’re going to sell seats to a chunk of customers.
The other thing to remember is that the vast majority of travelers are not actually particularly frequent fliers. The number of folks actually flying 25,000 miles or more annually is a terribly small subset of the total traveling public. For the folks who are actually flying a lot – and 25,000 miles annually is just the tip of that iceberg – there is absolutely value to be had in the programs. And even for some folks looking to rack up crazy amount of points via credit card transactions (hopefully with someone else’s money) there is value in the programs. But, again, that 25,000 annual number seems to be a pretty smart place to start as a threshold considering the fees and opportunity costs of directing spend to different cards.
The most surprising and also internally inconsistent claim made in that column is that the programs, started to help differentiate the airlines in a deregulated environment as the service levels started to rapidly decline, should somehow find a way to provide the same benefits for everyone. The programs are, for the most part, rewarding the folks who provide the most value to the airlines. Just because a passenger thinks they’re being loyal by making sure their once per year trip is on the same airline doesn’t mean they are actually a loyal customer. They certainly are unlikely to be a profitable one to the carriers. By providing incentives – mostly in the form of improved service levels in some form or another – to their most profitable customers the airlines are generating exactly the type of symbiotic relationship that good marketing should build. It isn’t at all clear why this is a bad thing in his view.
Are the programs perfect for everyone? Of course not. The implication that they should be is a pretty ridiculous leap that Elliott makes and one that unfortunately detracts from the very accurate part of his claim: most folks do not benefit from the programs. I certainly do, but I also know which of my friends and family to guide more towards loyalty and which to guide more towards always buying the cheapest fare, based on travel patterns and reward goals. The vast majority of the scenarios tend towards avoiding the loyalty programs, or at least not using them to drive purchasing decisions.
And anyone who says otherwise is either ignorant or lying to you.
Posted by Seth Miller on December 8, 2011 under Flying |
Chatting with some folks today about JetBlue‘s new DFW-BOS service got me to thinking. And that’s never a good thing. JetBlue paid a king’s ransom by some accounts for the eight slot pairs each at LGA and DCA. They’re going to need to realize some serious profits on that investment. So they’re going to want to go to markets where there are high yields and limited competition. Both airports are limited by perimeter rules in terms of flight distances that can operate so it is basically Texas or east (and not even all of Texas works) for the routes. So what would I do if I were sitting at the white board working on routes?
A somewhat disturbing and almost certainly untenable option came to mind: Attack DFW.
Assuming you could get another gate or two at DFW, why not attack the American Airlines hub? JetBlue has already shown that they’re willing to attack a little bit, putting 3x daily on DFW-BOS starting next year. Why not go all-in? Sure, they don’t really own any market share at DFW. Or LGA. Or DCA. But they could try, right?
It wouldn’t be a half-assed effort like Spirit Air‘s gambit. We’re talking about a total of 19 daily frequencies, all to major business cities and all where the competition is VERY limited. US Airways flies E-Jets 3x daily on the DCA-DFW route. US, Spirit and Frontier all list DFW-LGA but they all fly it as a one-stop direct flight. Seems like there could be a lot of fun to be had with some new blood bringing competition on these routes.
Then again, it would require the additional gate at DFW. And the stage length is a bit high for fleet utilization and yield management. Still, showing up at DFW with that much lift would be an incredibly entertaining challenge to the incumbent.
Another great option would be service from Austin, connecting folks from the west coast, too, but that’s just outside the perimeter at both LGA and DCA. Sad.
Besides, what else are they going to do? Fake shuttle service?
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Posted by Seth Miller on December 7, 2011 under frequent flyer, News, points |
A couple months ago things seemed all nice and rosy between American Airlines and JetBlue. The two signed an interline agreement just over a year ago that added not only traffic feeds between the two but also a limited frequent flier reciprocity scheme and the relationship appeared to be growing stronger. Today JetBlue announced that they are going to be starting service to Dallas-Fort Worth, one of the two fortress hubs that American Airlines operates where they still hold some pricing leverage. Whoopsie.
JetBlue is launching 3x daily service between DFW and Boston starting in May. The pricing isn’t loaded into reservations systems yet so it isn’t clear what the impact will be on fares in the market but it seems more likely that JetBlue entering the market will have an effect versus the announcement from Spirit Air that they will also be entering the market in February. But with 3x daily from the largest operator at Boston it seems much more likely that the competition is really heating up.
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Posted by Seth Miller on December 1, 2011 under Flying, News |
Common decency suggests you don’t kick a man while he’s down. That sort of policy doesn’t necessarily apply in business, however, and it definitely doesn’t apply for Spirit Airlines. Following on their $11 (plus a myriad of fees that no one can ever reasonably figure out) sale to celebrates American Airlines‘ filing for Chapter 11 bankruptcy protection earlier in the week, the Spirit announced a few new routes today focused on the troubled carrier’s fortress hub at Dallas Ft Worth.
Spirit announced this morning that they are launching four new destinations with once daily round-trip service this spring. The new destinations are LaGuardia airport in New York City, Atlanta, Boston and Orlando. The first three are big business markets where American will almost see an erosion of yields thanks to this move. That’s not going to help in their efforts to keep the revenue up. At least it is only once daily service compared to the AA frequencies on offer (BOS – 8, ATL – 12, LGA – 15, MCO – 11) so there is still going to be plenty of opportunities for AA to keep most of their business.
In other bAAnkruptcy-related news, AA has filed the paperwork to return 24 aircraft to lessors, starting the process of shedding some of their costs. Most of the planes are already grounded so it won’t affect capacity. Yet. They’ve also canceled two pilot recall classes, shifting those pilots back to furlough status.
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Posted by Seth Miller on April 7, 2011 under News |
Yesterday had a bit of a buzz on the internet regarding a piece about airfare pricing from Nate Silver that was published on his NY Times politics blog. The post, filled with mathematical analysis, attempts to use statistics to determine which airports have unfairly high fares relative to others providing comparable service. And I’m sure the math involved is accurate. I have no doubt that someone as statistically gifted as Silver got the regression analysis correct when he ran the numbers. But the findings are still miserably flawed.
Why? Because several of the assumptions made simply do not apply to air travel.
Silver acknowledges that most the other folks who have tackled this topic have made specific flaws in their assumptions. He aims to correct these but instead makes some tragic assumptions of his own.
Let’s take a look at the factors he considers:
The first factor is the distance traveled — we use the distance from the origin airport to the destination as though it were a nonstop flight, whether or not there was a layover along the way….
The first factor cited – distance traveled – is probably one of the last things that actually comes into play when airlines are figuring domestic market pricing. Should they? I can see that argument being made, but it ignores the general concept of market pricing and supply/demand dictating the going rate for a ticket. If the airlines wanted to price everything based on distance they could, but they’d be leaving a lot of money on the table for the shorter flights and they’d never sell the longer ones. Even just using the average costs to operate a flight as a price basis you’d be looking at $600+ on average for a round-trip transcontinental flight. They seem to sell a lot better in the $300 range, at least in major markets.
Silver chose to ignore whether there is a connection or not. While that is reasonable for calculating the distance traveled, it ignores perhaps the single greatest factor that drives travel bookings for business travelers, the folks paying the higher fares: schedule. When you’re a business traveler hopping between cities and trying to get to that next appointment on time and then home as quickly as possible you pay more for a non-stop flight. Should you? Maybe, maybe not. But you do. This pricing function is probably more directly traceable in cargo numbers and there is a ton of data available on that, including in Greg Lindsey’s Aerotropolis, a pretty good read. But the same concept absolutely applies to passenger travel as well. There is a very real value in speed out in the real world; there apparently isn’t one in Silver’s.
Silver found that Newark was about 25% more expensive than JFK based on his data. And there is no doubt that is the case on some routes. But when you also consider that Newark has quite a few more domestic destinations available as a non-stop flight than JFK does that price premium isn’t nearly as surprising. After all, folks pay for speed.
Certainly demand factors into the pricing as well:
Second is a variable representing the demand for travel at both the origin and destination airports. Demand is assumed to be a function of the number of origin-and-departure passengers that an airport handled (not counting passengers who passed through the airport on a layover), but with a modification for average ticket prices. In other words, if the average fare at an airport was high, the model assumed that more people would have wanted to fly there but were deterred by the cost, and if the average fare was low, that some passengers would not have flown if the fares had not been such a bargain.
Indeed, one can expect that fares to smaller destinations will be higher. And they generally are. But assuming that more people really want to be traveling to smaller cities but choose not to because the airfare is too high misses the point. They are smaller cities with lower demand for travel because they have fewer businesses, fewer residents traveling (or being visited) and generally less volume. They aren’t seeing lower air traffic because they are too expensive, they are seeing lower traffic because they are small. Lowering fares may translate to a small increase in volume but it most certainly is not a linear path.
Moreover, the ability for a new entrant to operate in a market requires a certain base level of demand. No matter how cheap the fares, you aren’t going to survive long as a startup carrier if your hubs are in Columbus, Ohio and Greensboro, North Carolina, for example; just ask SkyBus. This means major metropolitan areas see the up-starts, and those up-starts bring lower fares because that’s how they attract customers. Their fares go up over time – JetBlue and Southwest have proven this – but that’s where it begins. And that explains a lot of the pricing trends that are seen today.
Finally, Silver looks at the most important factor, competition:
The regression analysis also accounts for three other factors that have significant effects on pricing. These are, respectively, the market share at the origin and destination airports held collectively by the five “legacy carriers” (United, American, Delta, Continental and US Air); the market share held by Southwest Airlines; and the market share held by the largest single carrier at that airport (for instance, Delta and its affiliates are responsible for about 66 percent of all traffic at Atlanta).
…
Passengers at Newark paid an average of 12 percent more than those at J.F.K. for their trips to Los Angeles, 49 percent more for those to Chicago, 65 percent more to Dallas, and 118 percent more to Washington, D.C.
Given those numbers, it is probably useful to take a look at the competition in those markets. There is zero competition between Newark and Washington, DC. National airport is only served by Continental and Dulles is served only by Continental and merger partner United Airlines. Plus, those routes are not generally reasonable to fly with a connection. The travel time is so short that when you add the connection it is silly to fly when total travel time is important, as it often is. The Dallas route sees a bit of competition from American Airlines, as does the Chicago route. Los Angeles has a tiny bit of competition but it also has the advantage of being a long enough trip that making the schlep over to JFK to save some money on airfare doesn’t actually completely ruin the speed=value margins. Ditto for connecting flights that add a smaller percentage of time to the travel experience.
Somewhat ironically based on the first factor Silver names, longer distances traveled can actually drive down prices as the impact of connections or less desirable departure or arrival airports is decreased as the total travel time increases.
It is actually surprising that Silver didn’t note the disparity on pricing in the Newark/JFK – Boston market. For quite some time now Continental has held a monopoly on that route. Similar to the DC runs, it rarely makes sense to connect for such a short trip and Continental exploited that price disparity. Right up until JetBlue announced their entry into the market. The fares dropped quite quickly at that point. Hardly a surprise, really. Competition, not the airport, drove the pricing.
Here’s a much more simple way to figure out if an airport is expensive or not:
- Is it a mostly leisure destination? If the answer is yes then it is almost certainly not going to be as expensive on average. Atlantic City, Las Vegas, Ft. Lauderdale, Orlando and most the rest of Florida all come to mind, and not surprisingly they’re all on Silver’s list of good value airports.
- Is it dominated (60%+) by a single carrier?
- If that carrier is United, Continental, US Airways, Delta, American or Southwest then odds are it will be a more expensive airport.
- If that carrier is AirTran, Spirit Air, JetBlue or Allegiant (and, to a lesser extent, Frontier) then odds are it will be a less expensive airport.
- Is it a particularly large metropolitan area? If not, fares are going to be higher because demand is lower.
Three easy questions that don’t take statistical regression or misguided assumptions. Silver actually gets some of these, particularly regarding the competition factor. But he also has a couple huge misses, especially around distance traveled and the price/demand curve.
It would also be interesting to compare the actual costs of travel versus just the base fare data. Spirit has a pretty incredible ancillary revenues per passenger – to the tune of an extra $35/head on average – so those "cheap" airports can come with significant surprises once the customer gets to the airport. Indeed, the airlines are quite keen to sell these ancillary bits to their customers and many are now stating explicitly that these fees are where their profits are. The airlines even want to control the way those fees are marketed to the customer by cutting the GDSes out of the pricing loop. Not a good deal for consumers.
Oh, and the suggestion he links to about searching for the best airfares on weekends is horribly wrong, too. Tuesday or Wednesday mid-afternoon is the time you’re most likely to find deals. On the weekends the airlines are raising fares and limiting the cheaper inventory in an effort to cash in on folks shopping for their vacations while their home with their family.
Silver should stick to baseball and politics, two things that he appears to understand a lot better than air travel.
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Tags: AirTran, American Airlines, Atlanta, Boston, Chicago, Continental, Delta, fees, Florida, Flying, Frontier, JetBlue, Las Vegas, Los Angeles, Southwest Airline, Spirit Air, United, Washington DC
