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Lower airfares could produce windfall for businesses
By Matthew French
Staff Writer
Charleston-area businesses could be the winners in Delta’s decision to slash fares.
Delta, the Lowcountry’s largest air carrier, announced earlier this month that it would reduce a number of its airfares and restrictions, streamlining the ticket purchasing process and easing some travel constraints in an attempt to put more bodies in the seats. More specifically Delta is trying to lure more business travelers into its fold, it says in company statements.
Local airport officials are anticipating this to happen, as well as bring in more convention and tourism business to the area.
David Jennings, chairman of the Charleston County Aviation Authority and attorney with Rosen, Rosen and Hagood, says the reduced fares will almost certainly increase foot traffic through the airport, as fares that used to hover near $1,000 have fallen below $150.
“If I were to want to fly to Atlanta on a Thursday and come back the next day, I can get a businessman’s special for $148.90,” Jennings says. “That same flight used to cost $900 without the Saturday stay.”
Delta has cut its walk-up fares by up to 50%, capping coach class walk-up fares at $499 for a one-way trip and first class fares at $599. The airline has also ended the restriction requiring a Saturday night stay in order to get lower fares.
Analysts and airline officials, however, stress that not every ticket buyer will see a fare reduction, but the changes would make Delta’s fare structure easier to understand and manage. Leisure travelers will not likely benefit, because they generally buy their tickets well before their trips.
Charleston, says Jennings, is well-situated in that the area splits its passengers nearly 50/50 between business travelers and leisure travelers. He says any uptick in passenger traffic will likely come from both of these groups.
“Even on the hospitality side, people can now fly in and eliminate the Saturday stay,” he says. “So families and visitors aren’t bound to come in on a Friday or Saturday or stay through Sunday.”
Jennings says Charleston may now have an easier time bidding on business meetings and conventions because the lower airfare allows for more flexible scheduling.
“If there was a convention that ran from Sunday until Tuesday or Wednesday, we didn’t have a chance, because the airfare to fly people in was too prohibitive,” he says. “Now we are wide open to bid on first-of-the-week meetings where people come and only spend half of the week here.”
Delta, and all of the traditional big carriers, have for the past several years faced ever-increasing hurdles in their industry. Rising fuel costs, increased security costs, a scrutinizing consumer base and low-fare competition from the likes of Independence Air and Southwest Airlines are forcing the big carriers to alter their traditional business plans to remain competitive.
“We’re really not trying to impose an industry solution,” says Paul Matsen, Delta’s chief marketing officer, in a conference call. “We’re confident it’s the right solution for our network and our customers.”
Analysts have speculated that the company’s fare changes, if mimicked by all other U.S. carriers, could reduce the industry’s annual revenue by $2 billion to $3 billion a year.
Delta Airlines has 27 flights in and 27 flights out of the Charleston International Airport every day, making it the single largest carrier to service the region.
“Let it be clear, this is not a fare sale,” says Delta chief executive officer Jerry Grinstein in the conference call. “This is a fundamental change to our pricing structure. We’re expanding SimpliFares based on feedback from our customers, who are calling for simpler, more affordable everyday fares.”
FLYi Inc., Independence Air’s parent company, seems unconcerned by Delta’s moves, but would not specifically address whether they will force any change on FLYi’s part.
“We don’t comment on other airline’s fare structures,” says Rick DeLisi, spokesman for FLYi Inc. “What we will say is that we are the least-expensive major low-fare hub in the country, if you compare us to hubs like Atlanta, Dallas-Fort Worth or Charlotte.”
The airport authority has no way of knowing specifically how the cut in fares will affect the total traffic through the airport until it receives the official numbers from Delta at the end of the month.
Industry analysts say the move could finally wipe out some of the more embattled airliners, particularly US Airways, Charleston’s second busiest carrier. If other airlines follow Delta’s lead and similarly reduce their fares, their revenue will most likely shrink, at least in the short term. US Airways, which is in the midst of its second bankruptcy in two years, can ill afford to have less money on hand, even in the short term.
“I don’t believe it will hurt us in the long run [if one of the local carriers folds],” says Jennings. “If any carrier from an airport our size goes out of business, there will be a temporary, short-term disruption in the marketplace. We would have a void, but the existing carriers would pick up the slack or new carriers would come in.
“We have a very stable marketplace in Charleston, and have consistently had between 800,000 and 900,000 passengers get on the planes every year,” Jennings says. “The loss of a carrier wouldn’t impact the number of people who fly in and out of Charleston.”
Matthew French is a staff writer for the Business Journal. E-mail him at mfrench@crbj.com.
SIDEBAR:
Independence Air unconcerned about new, low-fare competition
FLYi Inc., the parent company of Independence Air, which is Charleston’s only low-fare airline, seems unconcerned with Delta’s recent maneuverings. However, the company has pared back some of its Charleston business because of less than anticipated demand, the company says.
In making its announcement about cutting its fares, Delta chief executive officer Jerry Grinstein says the company will directly compete with the low-fare airlines, including AirTran, JetBlue, Southwest and Independence Air.
“We are and have always been a true low-fare airline offering low fares on our advance purchase flights, but also on our last minute walk-ups,” says Rick DeLisi, spokesman for FLYi. “We invite comparisons between ourselves and any other carrier.”
Regardless of the company’s take on Delta, Independence is in the midst of tumultuous times. The company has announced it is cutting some flights from the Charleston area because of a lack of traveler interest; has allegedly submitted a bid to become a regional carrier for United Airlines; and saw its market value plunge from more than $450 million to slightly more than $77 million last year, according to NASDAQ.
DeLisi says the airline will be cutting its Charleston-to-Washington, D.C., routes from seven per day to six, and will eliminate its fledgling Charleston-to-Orlando and Charleston-to-Tampa routes at the end of this month. The Florida routes didn’t last long in the Lowcountry, having only begun in November.
“We thought the point-to-point, non-hub flying would work, but we have since decided against it. We found the demand in Charleston isn’t what it is in Washington,” he says.
Published reports also indicate the low-fare airline, based in Dulles, Va., has quietly put in a bid to become a regional carrier for United Airlines, thus ending its direct sales to the public.
FLYi would not comment on the reports other than to say it “is having discussions with other airlines regarding potential strategic or business opportunities.”
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