Airlines lower fares to lure travelers during recession

Sun Country plane
Airlines such as Sun Country are lowering fares and holding sales to entice more travelers during the down economy.
Creative Commons photo by Flickr user: Bryan

Airfares are dropping as cautious consumers hold back on booking flights.

Once again, the airline industry is in a familiar squeeze; falling demand for seats on their planes, rising fuel costs and the prospect of big losses. For the consumer, it all adds up to fare sales.

If you're got the bucks to fly these days, you can find a lot of sweet deals for travel this summer, fall and winter.

George Wozniak, owner of Hobbit Travel, can hardly believe some of the prices he's been seeing.

Wozniak said flights on American Airlines to places such as Cancun and Cozumel are as low as $120.

"Both Cancun and Cozumel, from the Twin Cities," he said.

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That's roundtrip, excluding taxes and fees.

Maybe Mexico is a bit warm right now and there's that concern about the H1N1 flu, but there are a lot of cheap fares out there now for summer, fall and winter travel.

You can fly to Boston, Seattle, Los Angeles and several other major markets on the east or west coasts for under $200 round-trip this summer or under $150 this fall. Round-trip tickets to several destinations in Central and South America are going for $300.

Wozniak said you can get to London or Paris and back for about $700.

"That's half of what it was a year ago," he said.

Some industry consultants say the cheap fares are starting to slip away. They expect airlines will be able to push up prices. But Wozniak doesn't see the cheap seats disappearing anytime soon.

"We're going to see these all the way through the end of the year," he said.

Airfare forecasts, of course, are often about as reliable as predictions about the stock market and economy.

Most airlines have been whacking fares though, including Sun Country, Southwest, AirTran, US Air and Northwest and its parent airline, Delta. Wozniak said Northwest, which dominates the Twin Cities air travel market, has been quick to put up its dukes in any fare fight.

"They have followed every fare discount I've seen all summer," Wozniak said. "They match them immediately."

Passenger traffic for U.S. airlines was down about 10 percent in the first quarter of this year. Ticket prices were down about 11 percent on average through May.

Rising unemployment, as well as big drops in home values and the stock market, have made many people hesitant to spend money on unnecessary air travel. Airlines also have lost business because of the swine flu. Fear of the flu has spooked many people out of traveling to Mexico or around Asia.

Airlines are cutting flights to trim their spending and they've been knocking down fares to get more people on remaining flights.

"This has been a soft month across the industry," said Wendy Blackshaw, vice president of marketing for Mendota Heights-based Sun Country Airlines. "So, definitely we are looking at lowering the fares to get people on the planes, absolutely."

Sun Country has been pretty aggressive on pricing. Its current sale, which ends today, includes $99 one-way summer fares to both coasts and $59 one-way fares to the coasts for fall and early winter travel. Those fares exclude taxes and security and other fees, but still they're cheap.

Blackshaw said Sun Country wants to entice people into booking tickets more in advance of their travel dates. Early bookings help the airline plan its scheduling and refine its pricing, and Blackshaw said early bookings pay off for travelers, too.

"It's enticing for people to book now because, frankly, if the economy does better, the fares aren't going to be this low in fall and early winter," she said.

The downward pressure on fares has been great for consumers but terrible for airlines. One industry group forecasts airlines based in North America will lose $1 billion this year. Worldwide, airlines are on track to lose $9 billion.

"I think this year is going to shape up as every bit as bad as 2001 for the industry," said Bill Swelbar, an airline industry consultant. "I wouldn't be surprised if we see revenue for the industry down 20 percent."

Of course, much of that revenue loss will be the result of travelers getting cheap tickets. The airlines' pain is the consumers gain, at least in the short run.