Corporate

Cheaper air flights getting easier to find, for now

Low-cost carriers appear to be pushing larger airlines to slash prices and offer fire sales.

The Washington Post reporter Thad Moore offers insight into how the airline industry appears to be making changes to keep up with traveler trends.

If you’ve been paying close attention the last few weeks, you’ve had a good shot at a deal on a plane ticket – say, $38 from L.A. to Las Vegas or $49 from Washington to Indianapolis.

At least three airlines have offered fire sales on airfare recently, with one-way tickets on some routes dropping under $50. Southwest, JetBlue and Virgin have all promoted bargain-basement prices this month.

The fare-tracking company Hopper recorded sales of at least 20 percent off in more than 2,400 markets in September, more than any other month in the past year. This month, it expects to see nearly 1,700.

It’s not quite a price war, but the string of promotions highlights the airline industry’s increasing competition for travelers’ business.

For months, ticket prices held steady even though plummeting oil prices slashed airlines’ expenses. But over the past few months, fares have started to fall.

The average price of a ticket in September was about 6 percent cheaper than a year earlier, according to the federal Consumer Price Index and the industry trade group Airlines for America.

And ticket prices expected to keep falling through at least January, after the holiday travel season ends, said Patrick Surry, chief data scientist at the fare-tracking company Hopper.

That owes largely to stepped-up competition from low-cost carriers like Spirit and Frontier, analysts say, airlines that own a smaller slice of the market but make up a big chunk of the industry’s growth.

The U.S.’s fastest-growing airlines all promise low-cost, no-frills flights. Spirit Airlines has grown its seat capacity this year by more than 30 percent, Frontier Airlines by more than 20 percent and Allegiant Air by more than 15 percent, according to Airlines for America, an airline trade group. Meantime, the industry has averaged 5.1 percent growth.

That has put pressure on established airlines, which have resisted adding routes or cutting prices despite cheap oil and handsome profits. American Airlines president Scott Kirby said last week that his company would start offering cheaper, stripped-down service next year in an effort to compete.

“Those carriers are relevant, and we have many customers who are willing to fly them,” Kirby told investors. “We have to compete for them. We can’t just walk away from that side of the business.”

The ramped-up competition comes after stubbornly high fares drew the attention of federal investigators. The Justice Department started investigating the nation’s four largest airlines this summer for potentially colluding to limit their growth – and keep prices high.

“Competition is alive and well in the airline industry,” Airlines for America spokeswoman Melanie Hinton said in a statement. “A more stable industry environment has allowed U.S. airlines to grow.”

The effect the low-cost carriers play isn’t always obvious. They don’t offer the sprawling hub-and-spoke systems the big players do, but their impact spreads past the airports they fly from. Prices in Greensboro, North Carolina, for example, have been pushed down by low-cost service in Raleigh, an hour’s drive away, Kirby said.

Still, dropping ticket prices haven’t squeezed airlines too tight, said Bob Mann, who runs the airline consulting firm R.W. Mann & Co.

While fares are down about 6 percent, jet fuel is down even more – about 45 percent, according to the U.S. Energy Information Administration. And fuel usually accounts for about a third of the cost of running an airline.

“These are still very economic fares to be selling,” Mann said.

But the heating competition is raising challenges for airlines, as their soaring profits hit new headwinds.

Spirit chief executive Ben Baldanza said Tuesday his airline could wind up with lower profits thanks to lower fares. The airline’s average ticket price fell 13 percent in its latest quarter, he said, even as its earnings jumped 45 percent.

“In some of our markets, we continue to see very low prices from all competitors, including legacies,” Baldanza told investors. “We think that may continue, perhaps for longer than people expect.”

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