Five reasons Thanksgiving travel will be miserable (by the numbers)

by Tom Johansmeyer on

You may have gotten a break last year, but the 2010 Thanksgiving holiday will be a return for the norm. Fares are increasing, and traffic is following, as more passengers take to the skies thanks to a recovering economy. The Air Transport Association puts year-over-year Thanksgiving travel growth at 3.5 percent. This is enough to show the tide has turned, but it still doesn’t compensate for the ground lost to the recession.

With more people flying, you will probably find yourself fighting for the armrest, sitting next to someone in that middle seat (unless you’re the unlucky passenger) and struggling to cram your carry-on into the overhead bin.

Let’s take a look at five data points that point to an unpleasant Thanksgiving flying season, with information reported by Reuters:1. 24 million people will fly during the 12-day period around Thanksgiving (November 25, 2010)
2. Daily volumes will range from 1.3 million to 2.5 million
3. Planes will be running close to capacity, with load factors approaching 90 percent
4. Fares are headed up to 18 percent higher than last year (according to Rick Seaney, CEO of FareCompare)
5. There are fewer seats, with capacity down 10 percent from 2008 levels

Click here for six rules for air travel during the holiday season >>

[photo by Augapfel via Flickr]

Airline demand suffered worst decline in 2009

by Tom Johansmeyer on

Demand for airline seats fell 3.5% last year, making it the greatest decline the industry has seen, according to the International Air Transport Association. Airlines had a tough time filling 75% of available seats on average flights, IATA reports, and an early recovery, given the difficult conditions of 2009, is unlikely. For the freight sector, the situation was even worse: a 10.1% year-over-year decline, with less than half of all available capacity consumed.

Giovanni Bisignani, IATA’s chief executive, says, “In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen.” He continues, to USA Today, “We have permanently lost two years of growth in passenger markets and three years of growth in the freight business.”

IATA forecasts a $5.6 billion loss for the air transportation industry in 2010. Bisignani observes, “Revenue improvements will be at a much slower pace than the demand growth that we are starting to see.”

Another “blue ribbon” panel to fix the airline industry

by Tom Johansmeyer on

It’s been a tough month year decade for the airline industry. In the United States, it’s lost $58.5 billion and cut 158,000 jobs. There never seems to be an answer, and news of an industry in jeopardy has become routine. So, .

But, it will be different this time. Transportation Secretary Ray LaHood says it will not be “just another advisory committee.”

On his Department of Transportation blog, LaHood writes, “I am not commissioning some report to fill space on my bookshelf. This committee will make a difference.”

He continues:

“Look, without a financially strong aviation industry, we will be unable to compete in domestic and international commerce. We could also fall behind in addressing our own infrastructure needs. So we must begin this important conversation in order to ensure a viable, competitive U.S. aviation industry.”

But, he has his work cut out for him, as does the advisory committee. The estimated price tag to fix the most vexing problems the industry faces is $20 billion. And, many of the recommendations from the last two panels were never implemented.

A new air traffic control system, based on GPS technology, is at the top of the list, but it’s years away. It could save us $40 billion a year in lower fuel and labor costs, not to mention trimming a lot a time from the 740 million people who take to the skies. But, the $20 billion price tag is frightening, especially for airlines that are perpetually behind the financial 8-ball. The other possible wallet belongs to the taxpayer. Anyone want to pay more?

Oh, taxes could go up again if new environmental legislation is passed, so buckle up for more.

On the subject of taxes, the airline industry gripes that it gets hit worse than liquor and tobacco companies (well, except maybe rollers of loose cigarette tobacco). This gives them even fewer financial options to improve equipment and service. For airline shareholders, Jim May, top dog of the Air Transport Association, puts the lost value at around $24.5 billion. Yeah, I spelled it because there’d be a lot of zeroes otherwise. Local and state taxes have gone up, applying even more pressure. But, the other side of this is that taxes are a fact of life for any company, and the airlines should suck it up and move on. Let’s face it: with the U.S. economy in its current state, nobody’s getting tax cuts anytime soon.

Foreign money, the airlines say, would make it easier. Right now, foreign investors’ abilities to invest in U.S. airlines are limited because of national defense considerations. But, this is probably a dated risk, according to Carlos Bonilla, who advised former President Bush (the recent one) on transportation matters. The airlines would still be subject to U.S. regulation, regardless of who owns them.

Airlines watch 15% of last year’s revenue disappear

by Tom Johansmeyer on

U.S. airline passenger revenue fell in October, completing a full year of dismal monthly performances. From October 2008 to October 2008, passenger revenue dropped 15 percent, according to calculations by the Air Transport Association. The study was based on a sample group of more than 24 air carriers. Falling ticket prices are said to be the problem … which means we can trace it back to household finances, throwing the job market into the mix.

With unemployment now above 10 percent, consumers are being careful with their extra cash (if they have any), and dropping cash on plane tickets is pretty difficult. Hey, that’s why more people are driving this year than in the past.

In October, the number of people flying on U.S. airlines fell 3 percent, and the average price to fly one mile dropped 13.5 percent. Basically, the number of people flying hasn’t fallen much, but they’re demanding much better pricing for their business. Airlines have to take it on the chin in order to bring any revenue in the door at all.

Passengers to become drivers for Thanksgiving this year

by Tom Johansmeyer on

We aren’t staying at home, but we’re definitely not flying. That’s the word out of AAA this year. Thanksgiving, always a travel-heavy holiday, will see more cars in the road than people crammed at the gate, as travelers respond to the recession and recent increases in airfares.

AAA puts the number of people driving 50 miles or more from home for Thanksgiving at 38.4 million — up 1.4 percent from last year. The number of people traveling by car (regardless of distance) is set to edge 2.1 percent higher. Meanwhile, the number of people taking to the skies is expected to drop a hefty 6.7 percent. The Air Transportation Association sees the passenger count dropping 4 percent, but that’s for the “holiday period,” which stretches from November 20 to December 1. “Economic headwinds” are the primary reason, the ATA says.

The economic situation’s role in the decision to drive versus fly isn’t limited to the change in prices. Airlines have been pushing their fares up for the past few weeks, but for consumers, the decision is based on cost relative to their willingness to spend. Rick Seaney, CEO of FareCompare.com, tells MSNBC, “A leisure traveler might have bought a domestic ticket for $350 last year. Lately, $250 has been the breakpoint; above that, they just weren’t going to buy.”

If your flight looks crowded this year, it’s probably because there aren’t going to be as many planes in the sky. Only 679 billion domestic seat miles will be offered this year, down from last year’s 730 billion, which was already cut from the year before. From 2008 to 2009, the number of available seat miles is off 7 percent.

While the economic climate is certainly a factor, AAA sees other drivers in the trend from wings to wheels. The cut routes and flights, delays and the security gauntlet have all contributed to the decline in Thanksgiving passengers since 2000 of a profound 62 percent. If the airlines didn’t think they had competition for the Thanksgiving season rush, this is an answer that can’t be ignored.