Bloomberg News

Passengers Pay 6% More for Thanksgiving Trips as Jets Fly Full

November 23, 2011

Nov. 21 (Bloomberg) -- Passengers are paying an average of 6 percent more this year for round-trip flights during the U.S. Thanksgiving holiday as airlines reduce their available seats to maintain pricing power.

Capacity cutbacks mean that travelers will find jets about as full as in record-setting 2010, even as the Air Transport Association trade group projects fewer people will fly during the 12-day travel period bracketing the Nov. 24 holiday.

Thanksgiving and Christmas bookings are bright spots for U.S. carriers in a quarter when leisure trips fall from summer peaks. Domestic round-trip tickets for Thanksgiving rose to an average of $375, including taxes, fees and surcharges, according to website Travelocity.com.

“It’s such a drag how around the holidays you are at the mercy of the airlines,” New York University nursing student Adina Fleming, 25, said in an e-mail. She said she hasn’t been able to visit relatives during Thanksgiving for five years because of high fares, so she arranged her $550 US Airways Group Inc. flight to San Francisco in July.

Costlier tickets and sustained unemployment rates of 9 percent will mean a drop in Thanksgiving passengers of about 2 percent to 23.2 million, according to the Washington-based ATA, which also forecast little change in airlines’ load factor, or the share of seats filled. That figure will exceed 85 percent on the Sunday and Monday after Thanksgiving, the holiday’s top travel days.

“Capacity has been cut more than the percent of travelers that are down,” said Melissa Klurman, contributing editor at Southlake, Texas-based Travelocity.com.

Airline Cutbacks

United Continental Holdings Inc., Delta Air Lines Inc. and AMR Corp.’s American Airlines, the three largest U.S. carriers, said available seats would be reduced at least 3 percent this quarter. Delta said its trim would be as much as 5 percent.

“We’re taking a lot more aggressive approach” to thin out flights on slower Thanksgiving-week travel days than in 2010, United Chief Revenue Officer Jim Compton told analysts on a conference call last month.

Ticket researcher FareCompare.com found the cheapest nonstop flight to Chicago from LaGuardia Airport in New York, leaving the Wednesday before Thanksgiving and returning the Sunday after, was $449, up 7 percent from 2010. The lowest fare between New Jersey’s Newark Liberty Airport and San Francisco, a route where United has the only nonstop service, was $1,186, up 46 percent, Dallas-based FareCompare.com found.

‘Very Strong’

“The industry continues to operate around an 80 percent load factor, with pricing remaining very strong,” Helane Becker, a Dahlman Rose & Co. analyst in New York, said in a Nov. 18 note to clients.

Some travelers try to “out-game the airlines” by shopping for travel over an extended period to find the lowest prices, FareCompare.com CEO Rick Seaney said.

“Unfortunately it’s like a game of Monopoly, and at the holidays, the airline owns Boardwalk and Park Place,” Seaney said, referring to the board game’s costliest properties.

Airlines are being squeezed this year by a jump in spending on jet fuel, which averaged about $3.06 a gallon last quarter, 45 percent higher than a year earlier.

That erodes the benefit from increases in fares and fees for services such as early boarding. U.S. carriers that report earnings posted a 66 percent drop in net income in 2011’s first nine months and a profit margin of 0.9 percent, said John Heimlich, ATA’s chief economist.

Peak-Day Surcharges

Surcharges on peak travel days from Thanksgiving through New Year’s help carriers boost revenue, as do charges for picking premium seats, booking trips with a reservation agent instead of online and checking luggage.

Thanksgiving travelers can look forward to stuffed overhead bins and under-seat storage areas as passengers bring more bags into the cabin to avoid those fees, Seaney said.

“Sardines would probably be less packed,” Seaney said. “People will be carrying everything they can.”

Joe Mellon, 25, an Omaha, Nebraska-based engineer for Kiewit Corp., opted to avoid the inconvenience with his plan to drive 13 hours to central Michigan next month for Christmas.

“I don’t want to risk flight cancellations and delays,” Mellon said. “I want to make sure I can make it home and not have to spend Christmas in the airport.”

Flying at Christmas also often means putting gifts into a checked bag, so Mellon will pocket the savings from his airfare and fees.

“That’s always frustrating, all the added costs that go along with flying,” he said.

--With assistance from Mary Jane Credeur in Atlanta and John Lear in Chicago. Editors: James Langford, Ed Dufner

To contact the reporter on this story: Heather Perlberg in New York at hperlberg@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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