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Battling airlines ease Hub airfares

Logan avoids US ticket price spike

By Katie Johnston Chase
Globe Staff / October 18, 2010

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Boston travelers are paying less for airfare than the rest of the country this year, a trend that is continuing through the busy Thanksgiving season as low-cost carriers make Logan International Airport a cost battleground.

Average fares from Boston rose about 5 percent in the first nine months of the year, compared with the same period in 2009, while fares nationally soared 19 percent, according to data compiled by Hotwire, a travel discounts site.

Thanksgiving week fares out of Logan are down 11 percent from 2009; nationwide, prices are up 9 percent.

“The whole market out of Logan has really become low cost,’’ said Edward Freni, the airport’s director of aviation.

Even as airlines have been raising fares around the nation to recover from the recession, in the past year Boston travelers have largely been shielded because of the intensifying competition at Logan.

The discount carrier JetBlue Airways, which has increased its presence out of Boston by 37 percent this year, is Logan’s biggest airline, in terms of passengers and flights. Southwest Airlines, the Dallas-based low-cost king, has increased its capacity by 153 percent in Boston since it began service at Logan in late summer 2009, sparking fare wars with JetBlue and AirTran Airways.

“JetBlue offers low fares and a great product at all our airports, and yes, this puts pressure on the other airlines,’’ said Dave Clark, its director of route planning. “More flights and more low fares are coming to Boston, as JetBlue’s rapid growth at Logan will continue for many years.’’

Airlines are drawn to Boston, especially now that Big Dig traffic snarls are gone, because of the mix of leisure and business travelers in the area as well as the high number of heavily traveled routes, said Southwest’s spokesman, Paul Flaningan.

“I think there’s just a lot of opportunity for carriers to make their mark,’’ he said.

And all this interest from low-fare airlines has been good for Boston passengers looking for good deals on one-way fares, such as a $7 sale to Washington, D.C., on JetBlue, a $119 sale fare to Los Angeles on Virgin America, and a regular $39 fare to Baltimore on Southwest, AirTran, and JetBlue.

The growth of low-cost carriers has even spurred so-called legacy airlines to drop their fares. Since Southwest entered the Boston-Philadelphia market in June, for instance, US Airways, previously the sole carrier on the route, has lowered its $1,100 round-trip fare to match Southwest’s $160 ticket.

A US Airways spokesman declined to comment on how low-cost carriers have affected fares at Logan.

Overall this fall, prices have fallen 11 percent out of Boston, compared with last September and October, according to Hotwire. And over the Thanksgiving holiday, the average ticket between Boston and Orlando is $335, down from $349 last Thanksgiving. The average price between Providence and Orlando, on the other hand, is $366, up from $274.

“It’s just staggering how aggressive they’re being,’’ said Clem Bason, president of Hotwire Group, which includes the site Hotwire.com.

The fact that Logan is not dominated by a single carrier also helps to keep prices down as carriers jockey for position.

JetBlue leads the way, with 18 percent of the passenger market share, followed by Delta Air Lines with 16 percent, American Airlines with 15 percent, and US Airways with 14 percent.

Frequent Boston-based travelers such as Anne Banas, executive editor of the travel website SmarterTravel, based in Charlestown, have noticed the affordability of fares at Logan, compared with the rest of the country. She booked a late-September trip to Chicago on JetBlue for $280 round trip, including taxes and fees — a price that remained the same right up to the last minute.

“I think people can count on low fares most of the time on routes where there’s a lot of competition among the low-cost carriers,’’ she said.

But it’s a different story in other parts of the country.

As airlines struggle to recover from a bruising few years of high fuel prices and low passenger demand during the recession, they have been cutting capacity, tacking on baggage fees ($893 million was collected in the second quarter of the year alone), and boosting fares.

And the strategy appears to be working. Passenger revenue has grown for eight consecutive months, according to the Air Transport Association, the airline trade organization, and the airlines’ profit margin in the second quarter was the highest it has been since the Bureau of Transportation Statistics started reporting quarterly data in 2002.

“I think the general trend is for fares to inch up as the economy improves, as [the price of] fuel goes up, and as consolidation progresses,’’ said George Hobica, founder of the fare deals site Airfarewatchdog.

Passengers should be happy prices are not substantially higher than they are, said Robert Herbst, an independent airline industry consultant who runs the website AirlineFinancials.

The price to fly, per mile, is just 0.02 cents higher than it was a decade ago, he said. If airline passenger travel costs had kept up with inflation over the past 20 years, Herbst estimated, that cost, including taxes and baggage fees, would be 59 percent higher than it is today.

Herbst noted that planes are stuffed almost to capacity, oil prices are high, airlines need to replace costly aircrafts with more fuel-efficient planes, and their staffs have been slashed.

In addition, recent mergers have given the airlines more pricing power.

“You are going to see fares continually going up, if nothing else to at least match inflation, because there’s no other way to collect revenue,’’ he said.

As this happens, Herbst sees the industry heading back to the days when flying on an airplane was considered a luxury.

“The days of flying coast to coast for $99 are long gone,’’ he said.

“As airfares head higher and higher, we’re going to go back to taking a flying vacation once a year, instead of three or four times a year.’’

Katie Johnston Chase can be reached at johnstonchase@globe.com.