Where’s the worst place in America to be a business traveler? If you go strictly by the cost of flying, the answer is Huntsville, Ala.
The average domestic itinerary fare during last year’s fourth quarter at Huntsville International Airport was $544, the highest in the nation. That was 12.9 percent higher than the cost of flying from Huntsville in the fourth quarter of 2011 and a distressing 31 percent more than the nation’s “average” fare of $374.
The bad news for Alabama business fliers is part of an otherwise wonderful data dump offered by the Bureau of Transportation Statistics (BTS), the research wonks at the U.S. Department of Transportation. Each year since 1995, the BTS has been serving up easy-to-read, easy-to-digest fare information that helps the inquiring business travelers make some sense of the nation’s infuriating and mostly opaque airline-pricing system.
Of course, Huntsville isn’t exactly a lynchpin of the nation’s commercial air-travel network. The northern Alabama city only handles about a million passengers a year and Huntsville International only has nonstop service to nine other airports. In fact, Huntsville is the very model of a tertiary “spoke airport.” All nine destinations you can reach nonstop are hubs such as Atlanta, Charlotte or Dallas/Fort Worth, which means Huntsville business travelers not only pay the highest average fare in the nation, they must also change planes somewhere else to get where they are actually headed.
Still, the state of fares at Huntsville is indicative of how warped the airline pricing system is. As you read the BTS list of 15 most expensive markets, you see a bizarre mix of airports. After Huntsville, the next four priciest cities are airline hubs: Cincinnati, dominated by Delta Air Lines (NYSE: DAL), is No. 2 with an average fare of $518. The third to fifth slots are filled by Houston/Bush Intercontinental, Washington/Dulles and Newark, all hubs of United Airines (NYSE: UAL). But other cities in the Top 15 are far smaller spoke markets: Madison, Wis. (Number 7 at $470); Knoxville, Tenn. (Number 8 at $463) and places like Grand Rapids, Mich.; Harrisburg, Pa; and Tulsa, Okla.
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Top 20 airports* (based on 2011 U.S. originating domestic passengers) ranked by average domestic itinerary fare in 4Q 2012. Fares are based on domestic itinerary fares. Itinerary fares consist of round-trip fares unless the customer does not purchase a return trip. In that case, the one-way fare is included. Fares are based on the total ticket value which consists of the price charged by the airlines plus any additional taxes and fees levied by an outside entity at the time of purchase. Fares include only the price paid at the time of the ticket purchase and do not include other fees paid at the airport or onboard the aircraft. Averages do not include frequent-flyer or "zero fares" or a few abnormally high reported fares. *Airports do not include Alaska, Hawaii and Puerto Rico. (Courtesy USDOT/Bureau of Transportation Statistics)
“It shows you we are equal-opportunity pricing idiots,” one airline executive told me with a laugh last week when I read him the BTS data. “There are so many factors that go into our fare decisions that the logic is inexplicable to outsiders. In fact, we don’t fully understand it ourselves.”
In other words, don’t ask the airlines why the average fare is nearly 15 percent higher in Memphis ($480) than Los Angeles ($409), but Delta announced last week that it was “de-hubbing” and reducing service in Memphis while airlines continue to pour resources into Los Angeles. For that matter, it probably isn’t wise to try to figure out why United Airlines continues to struggle financially even though four of the ten most expensive airports in the country (Houston/Bush, Washington/Dulles, Newark and Cleveland) are so-called “fortress” hubs of the world’s largest carrier.
Instead, let’s just have some fun with the fare figures the BTS has so helpfully provided. After all, we business travelers are the ones paying for the airfares so we might as well get some fun along with our cramped coach seat.
Choose your airport carefully
With an average domestic fare of $501 in the fourth quarter, the aforementioned Houston/Bush Intercontinental is the third-most expensive airport market in the United States. But its crosstown rival, Houston Hobby Airport, is No. 79, with an average fare of $336. Dallas/Fort Worth Airport is No. 24 at $407, but closer-to-downtown Dallas Love Field is No. 94 at $283. O’Hare Airport in the Chicago suburbs ranks No. 42 at $388, but the average fare at in-town Midway Airport is $304, putting it at No. 90 on the BTS list. What explains the discrepancy? Southwest Airlines (NYSE: LUV) dominates the three cheaper airports, while legacy carriers such as United and American Airlines (OTC: AAMRQ) control the higher-cost facilities.
Introducing the ‘JetBlue Effect’
There’s an industry moniker for the likelihood that fares are lower at airports dominated by Southwest Airlines. It’s called, prosaically enough, the Southwest Effect. We may now want to add the JetBlue Effect to the lexicon. At New York’s Kennedy Airport, where JetBlue Airways (NASDAQ) is the dominant domestic carrier, the average fare is $404. That’s nearly 17 percent less than at Newark ($484) across the Hudson River. At Boston’s Logan Airport, where JetBlue now controls more traffic than any other airline, the average airfare is $371, which means it is No. 51 on the BTS’ list of 100 major airports. And at Fort Lauderdale, Fla., where JetBlue is building its third “focus” city, the average airfare is just $267, which makes it No. 98 on the list.
After the hubbing is gone
A common mantra among airline watchers is that fares decrease sharply after an airport loses its hub status. Put-upon fliers in Memphis certainly hope that will be the net effect after Delta downsizes there after Labor Day. And there is precedent in the BTS fare numbers. Seven airports that have lost hub status in the last few decades are now ranked in the bottom 50 BTS fare slots. That includes Nashville, Tenn., Raleigh-Durham, N.C., St Louis and San Jose, Calif. (all formerly hubs for American Airlines) and Pittsburgh, once the largest hub of US Airways (NYSE: LCC).
The joys of competition
Denver International is only one airport in the country that hosts the hubs of three carriers: United, Southwest and Frontier Airlines, a division of Republic Airways Holdings (NASDAQ: RJET). According to the BTS statistics, Denver’s average fare was $320 in the fourth quarter of 2012, down 4.2 percent from the fourth quarter of 2011. That made it No. 84 on the fare list even though it is in the Top 5 for passenger boardings.
The bottom line
Of course, it must be said that all of these numbers are literally academic because no business traveler in the nation pays the “average fare.” Still, consider this: The BTS says the average domestic airfare nationwide in the fourth quarter of 2012 was $374. That was actually a dollar less than the average fare in the fourth quarter of 2011. Moreover, adjusted for inflation, last year’s $374 fare was down 16.7 percent from the $449 average fare in the fourth quarter of 2000.
That should make you feel better about the cost of your next flight. But I’m pretty sure it won’t.
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Metropolitan areas ranked by average domestic itinerary fare in 4Q 2012.
