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Forget About a Decently Priced Holiday Airline Ticket?

October 31, 2008 | Posted in: Airfare News,Airline News

Our friends at SkyTalk and AirlineBiz note today that J.P. Morgan is “throwing water” on an announcement we made that leisure travelers have gotten a break this week from sky high ticket prices around the holidays.

Their research note entitled “Holiday Prices Move Higher” and cites:

  • AirTran raised its 7 day advance purchase fares by $5-$15 one-way … widely matched by competitors — equating leisure travelers who had been getting quotes in the $400-$600 roundtrip range for holiday travel in the past month; who are now getting quotes for $200-$400 roundtrip for those same trips — with procrastinators and business travelers who buy 7 day advance purchase airfare on AirTran routes (and it’s competitors) has me scratching my head.

    I pulled the data from our historical database on AirTran’s Atlanta hub for longer trips (1200 miles or more roundtrip — about 25 destination cities with filed airfare) and put together a sheet with the daily average cheapest 7 day advance price for the month of October 2007 and 2008.

    The data doesn’t support the premise that AirTran 7 day advance prices are higher (for the holidays) as cited, rather the contrary. October 2008 is highly volatile and overall lower for 7 day advance fares compared to the same month last year — 10 days in October 2008 were over 40 percent lower than 2007 (airfare sales) — AirTran is notorious for weekly quick in and out “airfare specials” (as clearly evident in the graphic below).

    Also shown is an example of AirTran out-the-door ticket prices for a 7 night non-stop roundtrip departing each day in November from Atlanta to Detroit — looks like a pretty good deal to me for Thanksgiving travel (8-Nov-2008 is the 7 day advance purchase price breakpoint; Northwest and Delta have similar pricing in the month for their non-stops).

  • You’ll be paying for that suitcase – yes airline fees both new and increased add a wrinkle to the total cost of a trip this year (and likely for many years to come). Consumers should be very aware of these non-ticket charges and prepare accordingly.
  • Sales not earlier this year – I checked our historical databases each year from 2004 on and “JOY” Northwest fares did not become the cheapest in the marketplace on until Mid-November mainly because Northwest files a ton of very cheap “K” fares (I call them “Crazy Ivan” fares) that are typically super cheap, good only on Tue/Wed and only blacked out on peak holiday travel days — leaving other off-peak days around the holiday cheaper (with limited inventory).
  • Holiday Prices Broadly Higher – we have documented in excruciating detail the run up of 21 attempted airfare hikes this year and the minimalistic pull back in fuel surcharges since oil has dropped in the last 3 months (by over $80 dollars a barrel!).

    The disproportionate amount of higher prices this year are being levied on business travelers via a combination of higher fuel surcharges and onerous minimum stay requirements. Small cities with little competition are also bearing the brunt of hefty increases because there is less competition to drive down system wide airfare hikes.

    This holiday season is about getting a “better bad deal” - the holiday airfare sale we highlighted is “significant” — to be honest I was worried in early July that airlines would not file holiday sales after announcing unprecedented seat cutbacks (see the scope of the domestic holiday travel price breaks in this graph using our proprietary software). Recent trends in international ticket prices are also down — highlighting both seasonal and economic softness. These down trends provide a welcome respite from this year’s march to ever higher ticket prices — air travelers actually have a much better shot at visiting family and friends over the holidays today than they did just a few short weeks ago.

Our release (portions of which were used by AP in its article that evidently caused this stir) simply noted the “largest volume of sale activity of the year” — a pleasant surprise. It was not an analysis of price trends in 2008 which have been covered in several other articles as recently as the end of September — where we noted that airfares where up from 20 to 40 percent (metros vs. small cities).

Nonetheless, it isn’t just me that is seemingly “out of touch” with holiday prices – take our friends at Farecast who have excellent airfare technology:

In a blog post four weeks ago on 6-Oct-08 Farecast notes that Thanksgiving tickets were up 25% compared to the same time last year — But in an article in the Boston Globe filed tonight, Farecast updates with Boston specific information (apparently even before holiday sales kicked in this week):

“That could explain why the average prices for Thanksgiving fares have dipped since Sept. 26 and Christmas fares since Oct. 20. “Now prices are close to the level they were at the same time in 2007,” said Dave Hsu, an airfare analyst at Farecast.

And further notes that nationally that holiday prices are now 13 to 14 percent higher — down by nearly half in the past 14 days since their Oct. 6 update.

So is it “Holiday Prices Move Higher” as suggested by J.P. Morgan or a “Pretty Decent Holiday Deal” given the current environment?

You make the call!

I’m heading on a plane for the holidays for a decent price; I hope you do as well.

4 Responses to “Forget About a Decently Priced Holiday Airline Ticket?”

  1. John Putney says:

    Rick, How about toning it down a notch? Jaime Baker and JP Morgan have been covering airlines for quite sometime, and isn’t a newcomer to airline pricing analysis. What they present is true, even if it does run counter to your “analysis.” As someone was has worked in revenue management for a major airline for several years, I find your coverage to be interesting, but often short-sighted and biased in order to get your name and your website in the news.

    I have no concerns about you spreading the word on low fares, but it is misleading to the public to present your analysis as an absolute truth. Take what Baker says as perspective and use it to tune your analyses. Then everyone wins.

    Best,
    John

  2. Rick Seaney says:

    John,

    Your comment is well taken (the post was a work in progress and still is) – I’ll respectfully beg to differ w/you that the only reason I spend (way to many hours) studying airfare and flight schedules is to get our website in the news nor do I claim all information as “absolute” truth and that my ramblings are infallible, although you (by your comment) seem to think that Mr. Baker holds “the truth” — I’ll let the data do the talking for me.

    You are correct that I am a relative newcomer and not a 15 year veteran of analyzing airlines as a financial analyst nor a 15 year airline industry consultant. Hopefully w/o some of the baggage carried by some — my goal is to provide a fresh perspective and I don’t apologize for being passionate about our company and helping people find good deals to fly. This blog provides a forum for you to call me out — and certainly allows me to put my 2 cents in response — thus are the vagaries of blogging.

    I do however have the luxury of being one of the integral designers of our proprietary software which creates and manages one of the world’s largest proprietary databases of current and historical airfare information for over 500 airlines including fares, constructed fares, rules (20+ for each fare), surcharges, taxes/fees. Our software kicks out dozens of reports each day on airfare pricing activity that I suspect are quite different from what airline revenue managers get on a daily basis – and hopefully that gives me a bit different and unique perspective.

    As an airline revenue manager your job is to maximize revenue for your airline — which is what every business in the world is trying to do including ours at FareCompare.com — all good by me.

    Itinerary pricing/quoting systems and managing seat inventory is about as close to “rocket” science as you can get, which is one of the main reasons consumers are frustrated and don’t trust any one source for ticket quotes and purchases. The daily changing of fare prices and rules along with complex “yield” systems that are tuned to extract the most revenue out of each seat on each flight, by its very nature, causes customer confusion and mistrust — Why did the guy next to me pay $XXX more or less? What day should I buy my ticket? I got 3 different prices today for the same trip — what gives?

    What got my neck hair up on this particular note was the intimation that this recently filed holiday airfare sale and subsequent competitive matching was “a non event” and that this year is no different than previous years — funny I thought I heard recently that we were in “the greatest economic crisis since the depression” and OBTW oil has halved in price in the past 3 months … In July I did not expect to see holiday sales this year – in fact I predicted more hikes which didn’t come to pass.

    I have had dozens of notes from people this week who had been sitting on the fence about buying holiday travel because it was outside their budget who were ecstatic they got a decent deal this week. If airlines weren’t the least bit concerned about the economic crisis and planes were already full for the holidays — then why match so quickly or at all? I don’t think it is a stretch to assume more than the usual softness around holiday bookings is partially at play (even with significant seat cut backs) — especially since most air travelers are procrastinators and book inside 30 days before departure so the airlines don’t really know the full effects quite yet for Thanksgiving and Christmas bookings.

    The tone of the “rebuttal” — obviously intended for investors (not consumers which is who I am addressing), likely to hit the media over the next couple of days, struck me as not only overly dismissive, but demoralizing for fence sitting holiday air travelers, who otherwise might not take another look at “too high” holiday prices.

    For my companies sake, airlines and their employees sake, air travelers sake and the hundreds of thousands in aviation support and downstream air travel destination economies — I hope that flying doesn’t become out of reach for the millions who have been introduced to air travel in the last 2 decades.

  3. James says:

    John,

    You are definitely out of line. You obviously have no clue what an invaluable service Rick offers us as consumers (or maybe you do and just don’t like it). Yes it is true that he does this work to make money, but he does it with a passion. And by the way, this is a blog, therefore Rick can say anything he wants. But the word “truth” you want to throw at him boils down to reputation. And Rick has earned a good one, based on the popularity of his web site, his weekly columns, and the number of consumers who use his websites for information and flights. That is more than I can say about the airlines or Wall Street.

  4. Marilyn Scholze says:

    I unfortunately took your bad advice to buy my daughters flights to and from college for Christmas, early. Today they are at least one fourth less than I paid for them for the exact same flight, and other flights are even cheaper, and there is no way to get a refund of the difference. Normally I find the best prices are about 6 weeks before a flight, up to about four weeks before. I violated my own rule because of your strong and repeated advice to buy holiday tickets early!! As a result I paid way too much at a time I am hurting economically. You assured us prices would not go down. As a result I am out a bunch of money. Please don’t predict in the future if you can’t do better than this. Don’t use your forum to scare people into making stupid decisions.

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