Low-Fare Airlines Don’t Necessarily Bring U.S. Airports Low Fares: Report

Enticing a so-called low-fare carrier to a U.S. airport may do little to lower overall fare levels, according to a study by airline consulting firm Boyd Group International.

Boyd Group’s study shows that U.S. airports in the fourth quarter of 2012 with the highest cost of air travel ‒ based on fares paid per mile ‒ included Dallas Love Field, Cincinnati Northern
Kentucky International Airport, Memphis International Airport, Houston Bush Intercontinental Airport, Cleveland Hopkins International Airport and Tulsa International Airport.

A Southwest Airlines Boeing 737-800 pushes back from the gate at Dallas Love Field on April 16, 2013, the day the airport’s new terminal opened

Based on these findings, airports cannot expect that recruitment of a “low-cost” airline is a panacea for curing high fares. In fact, says Boyd Group International, of the 10 highest-fare U.S. airports, eight have at least one such incumbent carrier.

“Southwest captures almost 40 per cent of the Tulsa market, yet in terms of fare cost per mile, that airport is the sixth-highest in the nation,”points out Michael Boyd, chairman of Colorado-based Boyd Group International.

The consulting firm’s study shows the average true price of a one-way ticket has in the U.S. increased by nearly 30 per cent since 2008. The average base one-way fare, including federal fees and taxes, increased to $219.50 in the fourth quarter of 2012, up 12.5 per cent from 2008.

However, the real cost is up 29.1 per cent as a result of airlines increasingly charging for commonly used, previously free services.

The first Southwest Airlines 737-800 arrives at San Juan’s Luis Muñoz Marín International Airport on April 15, 2013. San Juan was Southwest Airlines’ first destination outside the contiguous United States

“Today, the fare is just the down-payment,” says Boyd. “It’s estimated that ancillary fees for services such as first-bag check, early boarding, ‘preferred’ seating, etc., on average adds approximately 15 per cent to the base fare of a one-way trip.”

While ancillary fees are not popular, they are more consumer-friendly than traditional across-the-board fare hikes, argues Boyd, adding: “Airlines today are profitable largely due to the revenue streams from these fees.”

Boyd Group’s study finds that in the fourth quarter of 2012, Los Angeles International Airport was the United States’ largest airport for domestic originating passengers, with almost 9.6 million local passengers. Chicago O’Hare International Airport and Las Vegas McCarran International Airport ranked second and third, respectively.

The report ranks the 100 largest airports by passengers, average ticket prices, and ‒ crucially ‒ the comparative cost of air travel, charged on a per-mile basis.

The Airbus A320 appears to represent the future mainstay of the Spirit Airlines fleet, the Fort Lauderdale-based carrier having 70 in service and on order, plus orders for 45 re-engined A320neos

“Comparing average ticket prices between airports is not a valid metric,” the report states. Geographic location, traffic mix, length of average passenger trip and size of the market vary widely between airports, skewing simplistic ticket-price comparisons.

“Newark consumers pay much less for air travel than do consumers in Tulsa ‒ 17.3 cents per mile compared to 21.1 cents ‒ a 22% differential ‒ but the average passenger trip from Newark is 1,938 miles ‒ 67 per cent longer than the average trip from Tulsa,” the Boyd Group report says.

As a result, although the average amount spent on a ticket from Newark Liberty International Airport is much higher than from Tulsa, the cost of the air travel from Newark is actually much less per mile.