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 The Brancatelli File

joe FARES ARE THE NAME
OF THE BUSINESS-TRAVEL GAME


BY JOE BRANCATELLI

June 8, 2000 -- We can mull over this week's merger rumors all you want. We can talk about American's separate discussions with Northwest and Delta. We can consider what a potential British Airways-KLM merger means. We can rail some more against United's attempt to buy US Airways.

We can even make up some combinations of our own. Like how about if Anglo-Dutch grocery giant Unilever, which recently gobbled up Ben & Jerry's, SlimFast and Bestfoods, buys TWA and then serves only Lipton tea and Entenmann's chocolate-frosted doughnuts on its flights? Or what if AOL Time Warner buys America West and makes us buy a subscription to Real Simple magazine with every ticket?

But I'd rather do something useful, like talk about airfares. After all, fares are the name of the game. The more we allow airlines to merge, the higher our fares are going to go. In fact, as a new report (http://ostpxweb.dot.gov/aviation/domfares/domfares.htm) from the Department of Transportation reveals, fares are already running amuck, especially in short-haul markets and on city-pairs where competition has previously disappeared.

Now I'm not stupid. I don't expect you to plow through the study, which covers fare activity during last year's third quarter on the nation's 1,000 busiest routes. So I've taken the liberty of hitting some of the highlights. And remember: The following figures are average fares, which means all those cheapie leisure tickets are thrown in with our full-full, walk-up, no-Saturday-stay prices. We business travelers pay a lot more than the average fare on most of the routes covered below.

SHORT HAULS, BIG RIPS
Pity the fools--153 a day, to be exact--who flew the 95-mile route between Cleveland and Detroit. They paid the highest fare per mile of any travelers in America. Northwest, which has a hub in Detroit and claimed 68 percent of the Detroit-Cleveland market, charged an average one-way fare of $164. That's an astounding $1.72 a mile. Second most outrageous short-haul rip: United charged $227 one-way--or $1.65 per mile--on the 137-mile flight between its Chicago hub and Grand Rapids, Michigan.

Honorable mention goes to US Airways. It charged travelers $1.27 per mile (an average of $252 one-way) on the 198-mile flight between its Philadelphia hub and Richmond, Virginia. Meanwhile, Delta charged an average of $234 on the 191-mile route between its Atlanta hub and Columbia, South Carolina. That's $1.23 per mile.

THE UNFAIREST FARE IN THE LAND
Travelers who flew United between San Francisco and Washington/Dulles had the dubious distinction of paying the highest fare in the nation, an average of $559 one-way. That's 23 cents per mile for a 2,420-mile ride, a price United could charge because it controlled 67.8 percent of the market. Compare that to the 2,423-mile Orlando-San Jose route. No carrier controlled more than 26 percent of the traffic on that city-pair. The result: an average fare of $229 one-way or 9.45 cents per mile.

NO COMPETITION, NO COMPASSION
The Transportation Department also pinpointed routes where fares increased the most. From the third quarter of 1998 to the same period last year, travelers between Atlanta and Mobile, Alabama, suffered through an average 83.7 percent price increase. Travelers flying between Minneapolis and Omaha were hit with a 66.2 percent increase. How were Delta, the 800-pound gorilla in Atlanta, and Northwest, the aviation emperors of Minneapolis, able to jack up fares? Easy. No competition. Low-fare AirTran dropped out of the Atlanta-Mobile market during the second quarter of 1998 and that left Delta with 98 percent of the market. Denver-based Frontier abandoned Minneapolis-Omaha service and left Northwest with a stranglehold on the route.

THE SOUTHWEST EFFECT
Some business travelers sneer at all-coach Southwest, the resolutely no-frills, low-fare carrier that makes no attempt to differentiate between frequent flyers and vacationers. Sneer at your own risk because Southwest is the only carrier pioneering new routes. One example: Baltimore-Manchester, New Hampshire. In the third quarter of 1997, only 32 passengers a day flew between the two cities. But Southwest's decision to launch service turned the route into the 91st busiest in the nation. More than 1,600 passengers a day flew between Baltimore and Manchester in last year's third quarter, a staggering 4,918 percent increase. By the way, the average one-way fare on the route dropped 68 percent, to $58 from $183, during the same two-year period.

HUBBA, HUBBA
Want proof the airlines gouge you when they control virtually all the traffic between their hubs? Consider these snapshots:

Delta commanded 96 percent of the traffic between its Atlanta and Cincinnati hubs and charged an average of $263 one-way for the 373-mile flight. That's almost four times the $71 average fare charged by Southwest and United on the 373-mile flight between Los Angeles and Sacramento.

US Airways carried 94 percent of the traffic between its hubs in Charlotte and Philadelphia and charged an average of $253 on the 447-mile route. On the 447-mile route between San Diego and San Francisco, the average one-way fare was $73.

Northwest owned 88 percent of the traffic between its Memphis and Minneapolis hubs and charged an average fare of $279 on the 700-mile route. The average fare on the 708-mile New York-Savannah route? $145.

Continental controlled 74 percent of the market on the 1,092-mile route between its Houston and Cleveland hubs and charged a one-way fare of $250. The average fare on the 1,093 competitive miles between Fort Lauderdale and Islip, New York? $102.

This column originally appeared at biztravel.com.

Copyright 1993-2004 by Joe Brancatelli. All rights reserved.