Airline mergers could lead to fare “creep”

The Southwest/AirTran merger isn’t expected to push fares much higher. The disappearance of seats that comes with airline consolidation would make you think that prices are about to rise, as the fundamental commodity of the airline industry becomes increasingly scarce. But, we’re not close to that point yet, notes USA Today:

“We’re not at the tipping point,” says George Hobica, founder of Airfarewatchdog.com. “I don’t think fares will be impacted much until we have three legacy carriers and one discount carrier remaining.”

The number of seats, however, is shrinking across the airline industry. Since September 2007, the number of domestic seats available has fallen 10 percent.

According to Hobica, look for fares to “creep upward,” but not at a rate that will horrify customers, a position supported by Frank Werner, associate professor of finance at Fordham University. He tells USA Today: “Generally, airline mergers remove competition from the skies, leading to higher prices. This will happen in markets where the combined Southwest/AirTran will not have a dominant market share.”

[photo by SkilliShots via Flickr]

Pricey tickets hold back leisure, but business travelers getting back on planes

The past two years have been nothing short of severe for the travel business, especially the airlines. Fortunately, it looks like luck is turning. Barney Harford, President and CEO of Orbitz Worldwide, says that the airline sector appears to be on the mend, at least for business travel. Consumers, on the other hand, aren’t buying back in as aggressively, as high fares are battling with continued economic constraints for wallet share.

The average airfare for domestic travel is up 10 percent, according to Hartford, with international fares surging 17 percent. He notes to CNBC:

“We are seeing … a moderation in the increases in air tickets that we were seeing in perhaps May and June, where we saw some really stronger increases in air tickets,” Harford went on to say. “We’re hopeful that we’ll see an increase in capacity in the airline sector, which will drive some moderation in (the price of) airline tickets.”

Nonetheless, you can still find some bargains out there, according to Hartford. Look for the best values in Caribbean destinations.

[photo by emrank via Flickr]

Virgin America launches 7-hour fare sale to say ‘thanks’ to flyers

Update: Due to the overwhelming response from travelers, Virgin America has decided to extend this sale by an additional seven hours! Tickets must now be purchased by 11:59pm PT tonight.

Everyone says ‘thank you’ in their own special way, but Virgin America is saying “you really like us!” with a last-minute fare sale.

Clearly overwhelmed with gratitude from being honored as “Best Domestic Airline” in the Travel + Leisure Annual World’s Best Awards readers’ survey, the airline is thanking the readers with ridiculously discounted fares. The “Three-peat” seven hour fare sale for travel starts today at 10:01am PT and ends 4:59pm PT at 11:59p.m. PT.

You must travel between August 25, 2010 and October 6, 2010. Fares start at $33 for short-haul flights (San Francisco to Los Angeles) and $113 for long-haul (New York to San Francisco, for example).

Maybe now is the time to finally book your summer vacation plans?

So google is buying ITA Software. What does it mean for you, air traveler?

First of all, what is ITA Software? Briefly, it’s a technology company based in Cambridge, MA that provides the airfare search software behind such sites as Orbitz, Kayak and many airline web sites. Its claim to fame is that it digs deeper into airline reservation systems than some other technologies, and usually finds fares that are only available via the airlines’ own websites. And it allows users to do an easy flexible date search over any 30-day period.

But: It does not provide searches on Southwest AIrlines, Allegiant Airlines, Ryanair, and a few other smaller carriers. Similarly, low-cost leader Spirit Airlines keeps its best fares for Spiritair.com.

Nor can ITA calculate promo code or some other special airfares that the airlines reserve for their own web sites.

Recently, for example, US Airways tweeted fares from Philadelphia to Tel Aviv for $99 each way plus tax, summer travel. JetBlue tweets frequently as well, with $10 fares. United recently tweeted 20% off discount codes. These deals were not picked up by ITA Software. If airlines increasingly market their best deals through narrow channels, and keep them from ITA, it will further change the fare finding game. My thinking is that if airlines can figure out how to eliminate all third parties, such as profitable Southwest has done, they’ll do it.ITA also doesn’t include the “name your own price” fares you can find on sites like Priceline.com, which are often quite good if you don’t have a sufficiently large advance purchase window. And it doesn’t include consolidator airfares. In fact, no airfare search site includes all of these things.

So will the Google acquisition change airfare search for the better? Online airfare search “is ultimately not a very good user experience,” Google CEO Eric Schmidt said on a conference call. “There’s clearly room for more competition there.”

That’s an interesting statement. More competition? Compared to other categories, airfare search is anything but devoid of competition. Recently, TripAdvisor got into the game, as did Travelzoo with its fly.com site. That’s in addition to sites like Expedia, Travelocity, Orbitz, Cheaptickets, Hotwire, Booking Buddy, Farecompare, Yapta, Cheapair, and about a dozen others. ITA Software powers many of these sites already.

ITA does not sell airfares directly. It only shows what it believes the lowest fare to be on any given route, and then you need to conduct a separate search on the site of your choice to find the fare. Most people go directly to airline web sites to complete purchases, although sometimes the cheapest fare will be outbound on one airline and a return on a second airline, which is where the online travel agencies (OTAs such as Travelocity and Expedia) have an advantage, since they show fares on more than one airline. Will Google turn ITA into a fare-selling engine, in competition with its paying customers? Who can say?

Of course, Google is already in the fare search business. If you Google a term like “Boston to New York depart Dec 13 return Dec 15 2010” (try it), the top unadvertised search result will be a google-generated search box allowing you to click on many major OTA’s and meta-search sites.

But it will not actually return fares without further clicking. Perhaps at some point an ITA-generated fare result will pop up, showing the lowest price your Google search, instead of sending you to an OTA’s link.

Airfare search is such a crowded, ever-changing business, fraught with uncertainty and risks that it’s interesting that Google wants in. But I’ll have to assume they know what they’re doing.

George Hobica is the founder of Airfarewatchdog™, the most inclusive source of airfare deals that have been researched and verified by experts. Airfarewatchdog compares fares from all airlines and includes the increasing number of airline-site-only and promo code fares.

[Flickr image: tortuga767]

Kayak Explore: cheap airline tickets based on your budget

A neat new online tool from travel firm Kayak tells you where you can fly, based upon your available budget. Simply pop your departure airport into Kayak Explore, tell it how much you can spend, and when you want to fly – and the service will deliver a map of the world with little pins showing how much it’ll cost to fly there.

The site gathers its data from the millions of airfare combinations Kayak monitors, and allows you to find real bargains. Of course, with a tool like this, you can also find ways to maximize your mileage account, finding the furthest destination with the lowest price. Search filters even allow you to pick activities, spoken languages, and the average daily temperature.

The one thing the tool won’t do is tell you exactly when that fare can be found – the fare displayed is merely the lowest within a general time frame. Once you’ve found a cheap destination, you can enter your dates and head to the main Kayak search pages. You’ll find Kayak Explore at kayak.com/explore. Happy fare hunting!