The End of Cheap Airfares Signals the End of Cheap Group Travel
Maybe it was a case of sensationalist journalism, but the above headline in the Chicago Tribune proclaiming that cheap airfares are a thing of the past is sending shockwaves through the travel industry. The article points to rising fuel prices, rapid consolidation and a shake-out in smaller carriers who’ve traditionally been more apt to price fares at below-market rates in order to spur demand.
Airlines have commoditized their product by stripping out service and selling on price. When we don’t have price as a motivator, what’s to encourage people to travel? If routinely, airfares to Florida are $300 instead of $150, what’s that going to do to discretionary travel?
Frankly, I can’t place the entire blame on airlines. Costs are spiraling out of control. Oil’s $118 a barrel, unfathomable even a year ago. Maintenance issues that suddenly became a crisis only because the FAA has been asleep at the wheel will run into the hundreds of millions of dollars. The economy is strained, which puts a muffler on business travelers who are more apt to pop $500 for an airline ticket when they’re spending OPM (other people’s money). It’s this balance of high & low fares that has allowed airlines to skate by. When OPM dries up and leisure fares don’t subside, middle seats go empty and airlines find their way to the courthouse, again.
I’m smart enough to know that I’m not smart enough to be able to provide a solution to what ails the airline industry. But for those who invest in airlines, it’s a money pit. To quote Warren Buffett, “If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
Any group travel organizer who doesn’t think the disappearance of cheap airfares will influence their business hasn’t been doing their homework. Cheap airfares drive leisure travel. It’s what motivates people to travel. Without motivation to travel, people sit home watching their NEW big-screen, flat-panel, 42†LCD TV glued to CNN’s non-stop coverage about why people aren’t traveling.
Let’s not go there.
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