Airlines Faced With Fare Dilemma
Carriers worry price hikes may hurt business and encourage oversight
HOLIDAY travelers who plan to buy buy airline tickets will have to dig a bit deeper to pay for their trips. American Airlines announced Dec. 5 an increase in its MaxSaver fares, its most heavily discounted advanced-purchase ticket. The round-trip increase of $10 for trips of less than 1,000 miles and $20 on longer flights matches a similar move by Pan Am Corporation last week. The fare increase takes effect Dec. 16.
In addition, United Airlines has announced a small increase in one-way coach and first-class fares - $5 and $8 respectively - to take effect Dec. 8. (Negotiations have begun to increase airline service between the US and the Soviet Union. Story, page 8.)
Despite the increases, United States airlines are in a quandary over air fares. Costs - particularly of fuel - have risen. Yet the airlines don't want to further discourage passenger traffic, up only slightly over the last year. They also don't want to rouse a Congress newly concerned that the deregulated airline industry may be reconcentrating.
United delayed its hike once before, however, and could do so again if each of its competitors does not follow suit. ``You don't want to be out of whack with fares that are noncompetitive, even for a day, so we'll be monitoring the situation right up to the last minute,'' says United spokesman Joe Hopkins.
Lee Howard, vice president of Airline Economics Inc., suggests such caution is well founded. ``Fares are a real dilemma right now for the airlines,'' he says. ``They're jittery about what's happening to passenger traffic and about what impact a change in fares could have on Congress. They don't want to be up front at this particular time.''
Facts compiled by the US Department of Transportation (DOT), which is rushing to complete a study on airline concentration and competition by January, suggest reason for caution:
DOT reports that in 1988 some 90 percent of the nation's air passengers flew on only eight carriers. In 1984 some 15 carriers handled 84 percent of the traffic.
Also, DOT found that last year in 20 of the largest ``hub'' airports, where many flights connect, two airlines controlled more than half of all flights.
In such cases, airlines tend to charge whatever the traffic will bear, regardless of actual costs, says Christopher Witkowski, who heads Ralph Nader's Aviation Consumer Action Project (ACAP).
Mr. Witkowski characterizes the steady rise in regular coach fares over the last year or two as ``obscene.'' Many such fares within the US are now well above what it used to cost Americans to fly to Europe and back a few years ago. The lowest round-trip regular coach fare between New York and Los Angeles is now more than $900. Between Boston and Chicago that fare is more than $600.
Airlines point out, however, that 90 percent of all passengers fly on some kind of discount fare.
Most common are what the industry calls ``junk fares.'' Such unrestricted, refundable fares are largely unadvertised, says Robert Decker, an analyst with Duff and Phelps Inc., in Chicago. ``They just creep into certain markets at certain times of the day for certain flights,'' he says. ``They're not announced but the airlines can tell through their computerized reservation system when these are being used.'' Most airlines would like to cut such discounts, he says. They reason is that business travelers, who fly on short notice and often use such fares, can and should pay the full coach fare.
Elimination of certain discount fares is one way to raise prices without announcing it, says Mr. Howard. He expects that trend to continue once the present softness in the economy eases.
The deepest discount fare, the widely advertised nonrefundable ticket, is not a potential target for elimination. In only a few years' time the advance purchase fare, often only one-third the price of a coach ticket and refundable only in the event of illness or death, has become an integral part of the airline fare structure.
Airlines, which have long complained that too many passengers make multiple reservations they do not keep, like the fare just fine. ``It locks in the money and helps us thwart the no-show problem,'' says United's Mr. Hopkins.
Several Boston customers and travel agents agree that the fare is a bargain and accept its conditions. ``The rules are plain and simple - it means no money back,'' says Jorge Suarez, manager of the Copley Place Travel Bureau.
Yet a number say that the restrictions are unnecessarily punitive. They say shifts in vacation dates and appointments, often dictated by others, allow them no flexibility. They note that airlines continue to overbook. Many passengers whose plans change have to let the tickets go. ``They just lose the money - it happens all the time,'' says Bill Nichols, owner of Excelsior Travel Service in Somerville, Mass.
Nonrefundable fares, says ACAP's Witkowski, are a ``great burden on the passenger.'' He says the airline effort to liken them to a theater ticket, forfeited if unused, is a ``self-serving'' comparison that does not hold. An air ticket is much more expensive, he notes, and cannot legally be given or sold to another. As Mr. Witkowski sees it, nonrefundable fares, like hotel reservations, should be subject to change up to 24 hours before a flight. He says in most cases people will board their flights at the scheduled time but that the current system puts people under ``enormous pressure.''
Congress remains sensitive to consumer concerns on airfares. The shifts in fares and rules of sale, more than any other factors, says Howard, are prompting much of the interest on Capitol Hill in reregulating the airlines. ``I think fares are the biggest area of contention,'' he says.