Students have reaped the benefits of struggling airline
companies, but if the industry cannot correct itself, plane tickets
may quickly become harder to obtain, and much more costly,
according to many airline industry analysts. Recent competition for
lower ticket sales has pushed domestic airline companies into a
price war, but economists say if that price war leads to bankruptcy
and consolidation of airline companies, the net result will be
higher ticket fares, especially for flights to smaller cities.
“If one or more of the majors fail, you are going to have
concentration in the hands of the fewer guys,” said
University of Portland finance and transportation Professor Richard
Gritta. TWA, one of the major airlines, recently failed and was
bought by American Airlines ““ a company that is also seeing
hard times. For the first three months of 2003, AMR Corporation
““ the parent company of American Airlines ““ reported a
loss of $1.04 billion dollars. When the airline industry was
deregulated in the early 1990s, many travellers became first-time
flyers, but such passenger increases are unlikely today, said
Phillip Phan, management professor at Rensselaer Polytechnic
Institute. This has constricted the market share. “Jet Blue
gets market share by stealing market share from other
airways,” Phan said. Phan said this competition for market
share has been fueling price wars between air carriers, which is
causing every company to lose money on each flight. “If you
don’t make money on every seat you are selling, your airline
shuts down,” he said. Many analysts think the privileges
currently seen by air travelers will not last forever. “Right
now, there is pretty good availability of cheap flights, but that
is going to change,” said Ernie Goss, airline analyst and
economics professor at Creighton University.
A turbulent ride Following the attacks of Sept. 11, 2001, the
airline industry has struggled to regain customers or make a
profit. In March, there was a 5.7 percent decrease in the number of
domestic flights. This is coupled with airfare costs that have had
a net decrease over the past two years. The price for a 1,000-mile
domestic flight costs about $25 less now than in 2001. Hopes of
saving the industry are causing a fundamental shift in the economic
structure of the industry, Phan said. The traditional “spoke
and hub” system ““ which flies customers into hub
airports, then reroutes them to their destination ““ is very
costly to airlines, Phan said. As the occupancy of flights has
decreased, these hub systems have become less profitable.
Subsequently, major airlines are abandoning these routes. Many
economists attribute the success of Southwest and Jet Blue to the
fact they only fly point-to-point.
Filling the niche Increases in airfares are likely to hit the
lesser-traveled routes first, Gritta said. “If you are going
to fly from John Wayne (in Orange County) to Fresno, you probably
aren’t going to notice a lot of difference,” Gritta
said. “But if you are flying to Butte (Montana), you are
going to pay a hell of a lot of money, and it is going to take you
all day to get home,” he added. Gritta attributed this
problem to the major airlines abandoning flights along the
lesser-traveled routs, saying “they can’t make money in
those routes.” These vacant routes to smaller communities and
rural areas will be filled by smaller airlines who only fly to
those locations, said Peter Raven, airline analyst and professor of
marketing at Seattle University. “We will see more niche
airlines,” he said. The student market There are times when
college students cannot avoid traveling via airplanes. If students
live in Denver, they will probably elect to fly home, whether the
ticket costs them $180 or $195, but when travel is
recreation-motivated, students said the extra cost can be a
decisive factor. Alex Ooi, a second-year business economics
student, has been no stranger to air travel since this past summer
““ flying to Europe, Oregon and Sacramento ““ and has a
ticket to fly to Indiana this summer. “Price is a large
factor if it’s recreational,” he said. Lisa White, a
second-year English student who studied in London during the fall,
said she flew back to the United States for $800. “That is
pretty cheap … I appreciate anything that is cheap,” she
said. White added that the less the airfare costs, the greater the
opportunity college students have to travel. Although economists
have said they do not predict lasting increases in airfare to
arrive for a year or two, tickets will be more expensive for summer
travel, said STA Travel manager Aeron Wilson. Wilson added that
unlike past years, students are waiting longer to book flights
““ which results in higher ticket costs. To avoid expensive
airfare, Wilson suggested students shop around for the best deals
and purchase their tickets well in advance.