Aviation

Signs of the times

The Days of Cheap Flights is Over

Days of big discounts over, analysts warn

Vancouver Sun,

14 January, 2013

There was a time in the past decade when lucky travellers could fly from Calgary to Montreal one-way for $1.

Such ridiculously cheap fares didn't last long, and the airline that offered them has since disappeared from the skies.

Travellers no longer expect such eye-popping seat sales - but some argue the pendulum has swung too far the other way.

The combination of higher fuel costs and an improved economy means passengers are paying more than they used to.

It comes as Canada's two largest air carriers continue to report strong traffic in the skies. That's good news for WestJet and Air Canada shareholders - but not necessarily for people seeking a discounted fare.

Industry analysts expect the trend to continue in 2013. "It's a classic case of Economics 101. It's supply and demand," said Robert Kokonis, managing director at AirTrav Inc.

"When the economy is strong and traffic is strong, it does give the airlines a bit more pricing power. It means the good old days of snagging an empty seat beside you are really far and few between."

Kokonis estimates that the average one-way ticket from Calgary to Toronto, for example, costs roughly $40 to $50 more than it did a year ago.

"Multiply that by four if you're a couple with two kids, and it's significant," he said.

The recent holiday season saw many Canadians grumbling about the cost of flying across the country. But contrary to what some might think, Christmas fares didn't change from 2011 to 2012, insists WestJet spokesman Robert Palmer.

What's different is that travellers snapped up tickets twice as fast.

Airlines typically sell seats in escalating price "buckets." It means that fares are often cheaper initially to entice people to buy them but increase in price as fewer seats remain.

A healthy economy means a larger percentage of Canadians are prepared to spend the money to travel, putting seats at a premium.

"People are not seeing fares that have been adjusted. They are not seeing fares that have been raised," said Palmer.

"What they are seeing is what's left rather than, as in previous years, a broader selection of seats."

Experts agree that consumers need to adjust their expectations.

"Now that the economy has seemingly recovered a bit, true discounts are virtually non-existent on flights within Canada," said Chris Myden, founder of Calgary-based travel site YDeals.com.

"If the demand is there - and with WestJet and Air Canada being the only real (national) factors in the supply end of the equation - prices don't have an incentive to drop."

But it's not all doom and gloom for flyers. Prices to destinations outside of Canada - where there's more competition from American carriers - have not increased, according to Myden.

Indeed, higher fees and taxes for air travel in Canada are part of the reason so many Canadians are flocking to U.S. airports for better deals, a recent Conference Board of Canada report suggests.

A study by the board found wage disparities, U.S. aviation policy and even differences in what carriers pay for aircraft are other factors giving airlines flying from American airports a 30 per cent cost advantage.

Unfortunately, that doesn't help Calgarians much.

"Unlike Vancouver or Toronto, Calgary is not within a reasonable driving distance to a U.S. airport, so we can't really take advantage of the U.S.-based low-cost carriers - unless you don't mind a five-hour drive to Montana," Myden said.

But there are a couple of tricks to paying less. Some travel experts recommend signing up for airfare alerts because carriers will often make inventory available if seats are not selling on a particular route.

Another option is to watch for promotional codes. Profit margins tend to be thin in the airline industry and carriers are often willing to match each other's sales.

And beginning this year, there will be two new discount carriers in the sky. Air Canada's Rouge - slated to fly on July 1 - will focus on holiday destinations in Europe and the Caribbean, while WestJet Encore, a regional carrier focused on smaller markets, is expected to take flight sometime in the second half of the year.

Seat sales do still exist: Both Air Canada and West-Jet recently launched post-holiday discounts on flights to sun destinations and North American cities.

Nevertheless, some consumers still pine for the halcyon days of $1 fares.

Not a good idea, says Koko-nis, who believes passengers are best served when airlines are financially sound and not fighting to the death using unsustainable business practices

While nobody wants to spend more for anything travellers need to remember that airlines are businesses, he said. "Competition is good for consumers and it's healthy to keep companies in check and not abusing their pricing power," Kokonis said.

"But if we have too much competition - silly competition - it ends up damaging consumers more in the long run. That's when we end up with thousands of customers stranded during March break because the airline can't afford to get them home."

Air carriers say industry profit margins are often paper thin. In the case of WestJet, Palmer said the airline pocketed only $10 per passenger in 2011.

His advice to travellers? If price is important, don't wait. "We are flying more people than we've ever flown before," Palmer said.

"The implication is that you need to perhaps book earlier to get a seat, depending on the route, because we are flying so much fuller."