Holiday Cheer: Good Old-Fashioned Airfare Sales Are Back

This is going to be a lonely Thanksgiving for a couple I know out in California. Their only child had just begun his freshman year at a prestigious university in New England -- a school with an equally prestigious price tag (tuition, books, room and board costing about $50,000 a year).

The family decided that adding the cost of an expensive "turkey day" round-trip ticket to the mix just wasn't worth it. So, they resigned themselves to wait for a December reunion.

You can't blame them. I know of another family on the West Coast that did bite the bullet and is bringing their daughter home from her Midwestern college for Thanksgiving -- for a hefty $900. That hurts. But the student had little flexibility and had to fly on the Sunday after Thanksgiving, which is traditionally the most expensive day of the year to fly.

Even so, some Thanksgiving airfare prices a few short weeks ago bordered on the obscene. And it's easy to understand why some families are skipping these all-too-brief November get-togethers.

But wait a minute. Maybe these families -- and the rest of us -- should take another look at holiday airfares. I did, and all I can say is: Wow.

Tuesday, Southwest launched a massive winter airfare sale that covers Christmas with most prices below $109 one way. And you know what happened next, right? Other airlines immediately began matching those prices -- which is what typically happens, according to our historical data.

So, why did they do it? I doubt any of these airlines were suddenly infused with the "spirit of the season." It's simply that all these airlines want to thrive in a very volatile environment. And one way for airlines to thrive is by making us passengers love them again. Nothing says "love" like a good old-fashioned airfare sale.

It's about time. Never before have passengers had to put up with so much with so few rewards -- whether it's that first checked-bag fee (now standard with all the legacy carriers) or the "no free Cokes" rule (US Airways).

Airlines Regaining Customer Confidence

And how about those fuel surcharges? The saga of the fuel surcharges recently took an entertaining twist: I did a study last week that noted a number of domestic airlines had lowered or removed these surcharges. Great, huh? But don't get too excited because those fuel surcharges didn't disappear. The airlines simply added them back into the price of the base airfare.

Now that is some slick maneuvering, although, in fairness to the airlines, at least it creates a little more "transparency" on ticket prices. It isn't so convenient nowadays to blame the price of oil for higher ticket prices the airlines need to thrive.

But back to the passengers: They're still crammed into planes, as a direct result of the airlines' wielding their meat cleavers to create capacity cuts. Indeed, U.S. carriers cut about 10 years worth of seat growth in the past year, all the while slowly and surely raising prices. And in the meantime, the airlines have been "experimenting."

This grand experiment is all about how far an airline can push its passengers -- by raising ticket prices for overcrowded planes -- before the passengers finally say, "Enough." The airlines don't have a lot of background for this. They haven't faced problems like this since the recession of the early 1990s and the aftermath of 9/11 -- but they're learning.

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