7DaysinParadise
Travel => General Travel => Topic started by: Bulldog on January 02, 2009, 06:36:49 PM
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By Tobi Cohen, THE CANADIAN PRESS
MONTREAL - Fuel surcharges, extra baggage fees, time-consuming security checks and fewer flight choices made the skies an unwelcoming place in 2008 as the airline industry coped with challenging times.
But while tumbling fuel prices will bring some relief, don't expect the situation to improve drastically in 2009, at least not initially, experts say.
WestJet (TSX:WJA) has cut the fuel surcharges many airlines adopted last summer and Air Canada (TSX:AC.B) has eliminated fees for second checked bags and fuel surcharges on North American flights.
But Mike Skrobica, the Air Transport Association of Canada's acting president, says there are limits to what airlines can do.
"You'd hope, in a perfect world, with the lowering of fuel surcharges that some of the motivation that caused them to put in these ancillary charges would go away, but again, because of the fuel hedging, it's going to be much more muted than it would be in a normal business cycle," he said.
Compounding the problem is the worsening economic crisis, he said, adding many people are choosing to cut discretionary spending because of economic and employment concerns.
"Air travel is always the first to be hit when there are difficult economic times," said Joseph D'Cruz, an airline industry expert with the University of Toronto's Rotman School of Management.
"As unemployment goes up, that part of the market will disappear but, more importantly, the fear of unemployment will cause people to rein back."
The economic downturn has already led to about a 15 per cent decline in air traffic, D'Cruz said, adding it isn't just affecting leisure travel.
Many businesses, particularly banks, he said, are also tightening their belts and cutting back on everything but "essential" flights.
He said many companies have also cut business-class travel on everything but long-haul flights. Noting business class was once the "profit engine" for many airlines, he suggested that is now "withering."
D'Cruz also said a deal reached in early December between Canada and the European Union to open up their air-service markets isn't likely to benefit travellers for some time.
Airlines, he said, have actually been scrapping existing routes, cutting back on the frequency of flights and using smaller aircraft on certain routes which makes the likelihood of major expansions unrealistic.
He said airlines in Canada cut back on capacity last spring, well before the economic crisis reached a crescendo. As such, Air Canada's load factor is pretty good right now. However, the carrier is facing a sharp decline in forward bookings which is prompting it to offer seat sales and other incentives to encourage air travel, D'Cruz said.
WestJet is also experiencing particularly high load factors, something D'Cruz attributes to luck. A labour dispute at Boeing, he said, has delayed the delivery of new aircraft and, in the process, the company's planned expansion.
"That slowdown came at a very appropriate time for them," he said.
Recent media reports have also suggested Air Canada has resorted to an image makeover to beef up business.
The reports suggested a recent internal memo urged staff to smile and show an eagerness to help customers but D'Cruz dismissed the tactic, noting the airline industry has "degenerated into a total commodity business" and that price is the "only" thing that affects passenger traffic.
But all is not doom and gloom for those still seeking a holiday.
Flight Centre spokeswoman Allison Eaton said Christmas and New Year's bookings were as busy as ever and she suggested there are some great all-inclusive deals to be had.
Many four-and five-star properties are selling at three-star prices but Eaton said supply is limited and the "wait-and-see" attitude of many would-be travellers will inevitably lead to disappointment.
Flight inventory, she said, is down by about 60,000 seats and last-minute deals are unlikely unless people are extremely flexible.
Despite reports of a decline in air travel, Eaton said her travel agency hasn't seen it yet. But January is the company's busiest month for bookings as Canadians seek to escape the deep freeze or prepare for spring break so she expects the real test will come in the new year.
She remains optimistic.
"I'm still a firm believer... that people are still going to travel," she said. "As much as it's a discretionary expense, it's still people's holidays and they work so hard."
With the drop in the Canadian dollar, she predicts there might be less interest in travel to the United States and Europe. People may also opt for shorter getaways closer to home.
Noting trips to Walt Disney World are hot, she suggested the quintessential family vacation will likely remain popular.
"What I think some might do is instead of go for spring break, maybe they'll look at options that are not at peak times," Eaton said.
Despite many stories about seniors losing their life savings when the market crashed, there's little concern it will affect the thousands of "snowbirds" who follow the geese south every winter.
Eaton suggested retirees have the most flexible schedules and are more apt to fly mid-week or after the holidays to save money.
Canadian Snowbird Association spokesman Michael MacKenzie also noted that most retirees headed to Florida, Arizona or California will drive down since they're typically planning to stay for three to six months.
Much to MacKenzie's surprise, the economic downturn has actually proven a boon for retirees who happen to have a little extra cash lying around.
The U.S. housing crash means homes in Florida are going for half-price and the drop in gas prices is making the idea of travel more palatable.
Many old folks also stocked up on U.S. dollars when the loonie was at par, he said, adding that's provided some insulation
http://travel.canoe.ca/Travel/News/2009/01/01/7895306-cp.html