Essential Travel News for 4/02/07

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AIRLINES

Air fares posted sharp increases last year, study finds

If it seems like your business travel budget isn’t lasting as long as it used to, you’re right. An annual study of business travel costs by American Express, released last week, found that average domestic air fares paid last year jumped by 7.2 percent over 2005, while the average international ticket cost increased 5.8 percent. The domestic air fare increase marked a turning point: Since 9/11/2001, domestic fares had been declining year to year, until 2006, when that trend reversed. The average domestic ticket price last year of $231 was still well below the pre-9/11 average of $259, however. And during the fourth quarter of 2006, the domestic average actually dropped compared with the first three quarters. “During the last quarter of 2006, our data shows that clients had greater usage of discount coach fares and purchased more tickets in advance. These are some of the strategies we encourage clients to use to help avert rising costs,” an American Express executive said.
As for international routes, the average fare paid in 2006 was $1,707, up 5.8 percent from 2005, representing a total increase of 12.8 percent from 2004 to 2006. The biggest fare increases last year were on flights to China and India, which rose 11 percent, the company found. Overall, air fares went up last year because of rising fuel prices, and because planes were so full that the supply-demand equation shifted in favor of the airlines, AmEX noted.
Air fares weren’t alone in squeezing travel budgets, AmEx said. The average rate paid for a hotel room on an international trip jumped 8.5 percent last year, to $230. For domestic hotels, the biggest cost increases were in the budget tier – up as much as 19 percent to $150 a night by the fourth quarter of 2006 – the same as the average price paid for a high economy-tier property. Car rental rates on average were up 4.5 percent last year, to $69 a day, AmEX said.

Ohio-based low-fare carrier plans May 20 launch

According to a report in the trade publication Travel Weekly, Skybus, a new low-fare airline based at Columbus, Ohio, told the Transportation Department it expects to begin flying on May 20. The airline hasn’t yet said which cities it intends to serve from its Columbus base, but on its web site (www.skybus.com), potential passengers can sign up to receive announcements about its plans as they become available. Last fall, the company said it has signed firm orders with Airbus for 65 new A319s, to be delivered starting late next year; until then, it plans to use leased A319s, with a one-class, 150-seat configuration. According to its web site, Skybus has also entered into a partnership with the Avis/Budget group, so that its customers will be able to book rental cars from the airline’s web site.

ExpressJet begins independent operation, launches frequent flyer program

ExpressJet Airlines, which previously served only as a regional feeder partner for some major carriers, launches its own stand-alone airline operation on Monday (April 2). The company will use 50-seat regional jets to serve a far-flung domestic network of point-to-point service, linking a number of secondary cities and airports. On April 2, the airline started flights from Ontario (Calif.), Austin, Boise, Kansas City, Omaha, San Antonio, Spokane and Tucson. On April 9 it will begin service at Sacramento, followed on April 16 by Albuquerque, Oklahoma City and Tulsa; April 30 at Jacksonville, New Orleans, Colorado Springs, Corpus Christi and Fresno; May 7 at Louisville, Raleigh/Durham and San Diego; and May 14 at Bakersfield, Birmingham, El Paso and Monterey (Calif.). For schedule details, go to www.xjet.com. The airline has also started a frequent flyer program called JetSet that awards members one free roundtrip ticket for flying eight roundtrips or 16 one-way segments within a 24-monhth period.

AirTran ups its bid for Midwest Airlines

AirTran Holdings on Monday (April 2) upped the ante in its proposed acquisition of Midwest Air Group, the parent company of Midwest Airlines. AirTran increased its bid to acquire all outstanding shares in Midwest to $15 per share, including $9 in cash and 0.5842 shares of AirTran stock. When it first made a run at Midwest last fall, AirTran’s offer was worth $11.25 per share. Midwest’s board and management has strongly urged shareholders not to sell to AirTran, claiming that the offers undervalue the company, and that Midwest has a successful business plan and growth strategy in the works, while AirTran does not. Because of its increased bid, AirTran said it has extended its tender offer for a third time; it will now expire on May 16. “We are presenting this substantially enhanced offer now in order to give their board and management time to consider it and enter into discussions with us prior to Midwest’s May 23, 2007 annual meeting,” AirTran said in a statement. AirTran has nominated its own slate of directors for the Midwest board.

Southwest, AirTran reportedly weighing new passenger fees

According to published reports last week, both Southwest Airlines and AirTran Airways are thinking about imposing fees on passengers who want to get advance seat assignments. A Southwest spokesperson told the Houston Chronicle that the airline is looking into an assigned-seating fee as well as charging for meals. Southwest’s longstanding policy has been not to assign seats in advance, but to offer open seating at the airport, and boarding based on categories. The Southwest spokesman said the airline will not take away or start to charge for any services that are currently free, like snacks, pillows and blankets. Meanwhile, an Atlanta-based newsletter called The Ticket cited “sources close to AirTran” as saying that the carrier could start charging for advance seat assignments as early as June. Currently, it noted, elite and full-fare AirTran flyers can get assigned seats early, but lower-fare passengers don’t get them until airport check-in. Besides thinking about charging those passengers for advance seat assignments, AirTran is also considering a charge of $10 to $15 for reserving premium seats like those in exit rows, the newsletter said.

American will phase out MD80s; starts revamping 767 business class

American Airlines said last week it plans to speed up delivery of new aircraft from Boeing so that it can accelerate the phase-out of some aging MD80s from its fleet. American has an order with Boeing for 47 737-800s, which were supposed to be delivered from 2013 through 2016; but now American said it will start receiving the first ones 737s in 2009. “American intends to continue pulling forward deliveries of the other aircraft from their current 2013-2016 delivery schedule into the 2009-20012 time frame,” a spokesman said. “We believe that beginning to replace some of our MD80s in a measured way makes economic sense and represents prudent and strategic reinvestment in our business,” said CEO Gerard Arpey. The 737s will use 25 percent less fuel per available seat mile than the MD80s, he noted. Meanwhile, American said it has also started work on installing new in-flight entertainment systems in the business class cabins of its 767-300 fleet, used on transatlantic and some Latin American and domestic routes. Each aircraft will be equipped with portable entertainment devices that feature a 10.6-inch monitor; business class passengers will also get Bose QuietComfort 3 headphones to use with the devices. The system provides up to 14 movies, 15 hours of TV programming, 50 music CDs, 10-15 music videos, 14 audio channels and games. The business class overhaul in the 767s also includes lie-flat seats and other improvements. One other customer service enhancement from American: In New York City, the airline has opened a new, larger customer service center on Lexington Avenue between 40th and 41st Streets, replacing a facility in the Satellite Terminal at 125 Park Ave. The new facility also provides expedited passport and visa services.

INTERNATIONAL

Oneworld alliance adds five member airlines

The global Oneworld alliance -- which includes American Airlines, British Airways, Cathay Pacific, Iberia, Qantas, LAN and Finnair – has undertaken its biggest expansion since it was founded eight years ago. On April 1, the alliance added five airlines as new full members, including Japan Airlines, Malev Hungarian Airlines, Royal Jordanian, LAN Argentina and LAN Ecuador. At the same time, JAL’s regional affiliates including JALways, Japan Asia Airways, JAL Express, J-Air and Japan Transocean Air, became affiliate members of Oneworld. The expansion means that frequent flyer program members of Oneworld carriers, including American’s AAdvantage members, will be able to earn miles and claim award travel on all other member airlines, and elite members and premium-cabin flyers will be able to take advantage of reciprocal perks and airport lounges of all members. Dragonair, a Hong Kong-based subsidiary of Cathay Pacific, is waiting in the wings to become a Oneworld member soon.

Brazil’s GOL agrees to buy Varig

Brazil’s Varig Airlines, which exists in a shrunken version of its former self after nearly going out of business last year, is being purchased by GOL Lineas Aereas Inteligentes, the parent company of the low-cost Brazilian airline GOL, for a deal valued at $320 million in cash and stock. GOL said the two airlines will maintain separate branding and operations, but with coordination among their schedules. Varig will continue to operate two-class service on its remaining international routes – including New York JFK and Miami -- and will maintain some domestic services, with its fleet of 17 737s and 767s. GOL said it intends to increase Varig’s fleet to 34 planes. GOL will continue to focus on low-fare, one-class service on domestic and South American routes.

Mexican, Canadian carriers stop operating

A Mexican domestic airline called Lineas Aereas Azteca and Canada’s Harmony Airways are both discontinuing operations. Mexico’s government suspended the operations of Azteca after finding problems with its maintenance and training procedures, as well as concerns about the company’s financial situation; it gave Azteca three months to fix its problems if it wants to resume flying. Azteca operated a small fleet of 737s to Aguascalientes, Guadalajara, Hermosillo, Morelia, Mexicali, Puerto Vallarta and Tijuana.
In Canada, meanwhile, Vancouver-based Harmony Airways said it plans an orderly shut-down of scheduled operations due to tough competition, and may try to re-emerge as a charter carrier. Harmony discontinued Vancouver-Toronto service March 30 and will end other scheduled flights April 9. Harmony also flies from Vancouver to Las Vegas and Hawaii; it once served New York and San Francisco as well, but has been shrinking operations as its situation worsened.

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