Is it working? The airlines' survival tactic has been simple: raise fares as much as you can and then cut capacity, assuming that the lowered supply will push up fares. The fare increases as you know are not easy to push through, and even when they're called fuel surcharges, people fight them. So the carriers are relying more on capacity cuts to lead to the natural auction-like effect that takes the supply and demand relationship into reality: fewer seats, people will pay more for what there is. We know capacity is down already, though it's only in the 3%-5% range. The big cuts come next month.
Well, the evidence would seem to be that something is pushing up fares, even as business travellers are trying to get around the trend. The American Express travel unit says that fares are indeed up, with international fares at their highest point in about a decade and domestic fares rising as well. Herve Sedkey, the AmEx global advisory services vice president, says that average domestic business fares are up $24 from a year ago and up $27 from the first quarter of this year, to $260, up almost 12%. International fares paid by business travellers are up to their highest levels since AmEx began tracking fares in 1999, to $1,980, up 11%, he says.
|
International |
Q2'07 |
Q3'07 |
Q4'07 |
Q1'08 |
Q2'08 |
|
Average Fare Paid |
$1,788 |
$1,853 |
$1,957 |
$1,911 |
$1,980 |
Source: American Express Business Travel Monitor
Companies are trying to get round the increases by avoiding the premium-fare parts of the plane such as business-class and instead booking in coach in advance. Advance booking is now at an all-time high of 89%, says Sedky
. For regular people, fares are about to move up as well, although the predictions and measurements vary. Travelocity says that domestic fares are up by 14% and that people are booking farther out - 116 days as opposed to 112 days ahead a year ago.Some popular vacation spots are seriously more expensive, with airfares to Orlando up 5%, both Cancun and San Juan up 10% and the Dominican Republic up 9%, said Amy Ziff of Travelocity.
But we won't really know until sometime in October, when all of the capacity cuts really kick in, how much the cuts are pushing up the costs.
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