May 28, 2008 12:55 PM

Rick Seaney, CEO of Farecompare.com, on the airline industry

Mark_Wolf(Q) Welcome Rick Seaney. How long have you been covering the airline industry and have you ever seen it in a more tumultuous state?
Rick_Seaney(A) I started in travel technology in 2002, so I missed out on the direct aftermath of 9/11 so most likely this is the most tumultuous
The airline industry has been hit in the past 10 months with a slowing economy coupled with record fuel prices. Airlines are creatures of habit and like history to look back on and there is no history for this combination of issues

Mark_Wolf(Q) We saw another round of fare increases last week. Do you think more are in store before the end of the summer?
Rick_Seaney(A) We had 23 attempted increases in 2007 and 17 success (meaning that all 6 legacy airlines matched across the bulk of their route system). In 2008 we have had 16 attempted increases with 12 widely successful (in the first 4 months of this year it was about 1 a week). I expect to see a few more before the typical slowdown for purchasing travel after kids start going back to school in late August and early September If oil hits $200/barrel I think we will see 30+ increases this year.

Mark_Wolf(Q) What kind of fallout do you expect from American's decision to charge $15 for checking a customer's first bag? Will other airlines follow suit?
Rick_Seaney(A) Other airlines if they are are smart will let American stew in the wind with the press for a few more weeks. Desparation however will probably cause at least a few of the legacy airlines (American, Continental, Delta, Northwest, United, US Airways) to match. The downstream effects on TSA security check with more bags and gate and cabin checks could potentially be a nightmare. Passengers are already crank with almost 30% delays and cancellations last summer this just puts the anxiety level up another notch

Mark_Wolf(Q) At first glance American's first-bag fee sounds like a recipe for disaster in the check-out line. I mean, people already carry on bags stuffed like kielbasa.
Rick_Seaney(A) :-) Yes, up to this point most of the new and raised fees imposed on passengers where for smaller segments, this one touches those that can least afford it -- those with families of four. And no I don't know what a kielbasa looks like in the TSA X-ray machine -- not sure I want to know really :)

Mark_Wolf(Q) Here in Denver we've seen Southwest increase its presence dramatically (75 percent increase in flights this year), increased traffic and relatively stable fares. Are we an anomaly?
Rick_Seaney(A) Denver has certainly been an anomaly over the last 10 months, other cities like San Francisco with the relatively new Virgin America have also had relatively stable pricing (also included some competition overlap with Oakland). For the most part the biggest losers are smaller cities with little or no competition, while those cities with significant low cost airline competition have been mostly stable. Of the hikes in the past 2 years low cost airlines have only joined in about 1/4 to 1/3 of them -- subsequently the legacy airlines have had to match and could not increase these to the level they wanted

Mark_Wolf(Q) Can you draw any conclusions about summer travel based on queries at your site, Farecompare.com?
Rick_Seaney(A) Sure There are areas of the country like Florida (hurricane jitters and heat/humidity) that are great deals for leisure travelers this summer (less than $200 roundtrip from many parts of the country). Business travelers on the other hand are taking it on the chin with a disproportionate portion of hikes and the removal of minimum stay rules that don't allow savvy early purchasers the ability to use cheaper leisure airfares for their business trips. The bottom line is that airlines know when, where and what time you want to travel and are going to charge you a serious premium. If you want a decent air deal you have to be flexible - travel on Tues, Wed, Sat - travel at off peak times like first flight out, lunch and evening - and pick destinations that are out of the norm (especially if you want to redeem miles which have little seats left)

Rick_Seaney(P) If oil hits $200/barrel prices will have to almost double and this will keep people in droves from flying. The airlines don't have much control over this situation. They don't have many arrows left in there quiver and we are likely to see tons of cities lose most or all of their service and a continued concentration on more lucrative international travel. Southwest has nice fuel hedging this year and 50% next year so it will be probably one of the lone bright spots when/if oil continues to rise unchecked.

Mark_Wolf(Q) What's with the return of the Saturday-night stayover and other minimum stay rules?
Rick_Seaney(A) Simply another way to add revenue - requiring business travelers to pay business prices instead of leisure prices. Most low cost airlines have a one-way fare structure so minimum stay rules don't apply. Legacy airlines however tend to file their cheapest airfare as roundtrips and previously relaxed minimum stay rules to match those one-way structures -- but now more -- we are seeing a resurgence in these rules this year -- simply to add more revenue to the bottom line

bryaninSF(Q) Isn't carbon-free travel (e.g. Amtrak rail passes) looking much more attractive and affordable?
Rick_Seaney(A) Yes and No. For business travelers "time" is the key and these alternatives don't normally fit in their mix. For leisure travelers there are certainly good "green" alternatives. Buses for example are having a resurgence in certain areas -- one problem has been since fuel prices were so unexpected these alternates had no idea and haven't been able to ramp up

Mark_Wolf(Q) I've had good luck in recent summers flying on the Fourth of July. If your schedule permits, is flying on holidays generally a good idea?
Rick_Seaney(A) Great Question! In years past airlines put out what I call "Holiday" airfares, especially on the day of the holiday or the off-peak days around the holiday. We saw a few at Valentines this year and even less at Easter this year. I expect to see a few for July 4 this year because of some softening this summer. I always bring my father in law in the day of Thanksgiving for example - the actual day of the holiday is one of the best days to travel especially for seniors who don't like the bustle of airports -- even better the prices for flying on the holiday can be 30-80% cheaper than other days around the holiday

Mark_Wolf(Q) Do you think the airlines may be near a tipping point in terms of load vs. price?
Rick_Seaney(A) Many of my compatriots say we are past the tipping point -- I don't necessarily agree. I still think there is some headroom for price increases (for example an average ticket in 1997 was over $500, and we are still under $400 this year). Airlines are in an unusual situation where many times they fly full flights and still lose money on that flight -- so at $150/barrel of oil the best thing for them is to reduce as much capacity as possible to keep their cash flow up and hope that somehow fuel prices trend down. Gary Kelly the CEO of Southwest said no airline can survive at $120/barrel for an extended period - and Southwest is sitting on $51/barrel for 70% of their fuel this year (in hedging) -- this doesn't bode will for the rest of the airlines ...

bryaninSF(Q) I love farecompare but when are you going to have airfare-information on international flights?
Rick_Seaney(A) We do have international informaiton as long as the city pairs touch the US/Canada, you can query outside (US/CA) but we don't have the raw airfare data history and alerts (we are working on monetizing this traffic better and it may be available early next year). By the end of the fall you will see a complete makeover on FareCompare.com with dozens of new, easier to use tools that will help everyone make the best air travel buying decision Many of us have been elected the "travel agent" of the family -- and it is a thankless job -- Our goal is provide the state of the art technology and educational tips to make sure the "travel agent" of the family always makes the air travel purchasing decision