Era of cheap fares over? Yes, and no.

(Click for source)

(Click for source)

“The era of cheap airfares is on the wane,” Slate’s business and economics correspondent Matthew Yglesias wrote this past week in an article on airline mergers in the U.S. “Regulatory changes in the late 1970s and early 1980s opened the industry up to competition that was a boon to passengers but a disaster for the established airlines. In the aggregate, passenger aviation in the United States has racked up about $30 billion in losses over the years . . .”

Undoubtedly, the cost of air travel in the U.S. needs to rise if that country is to have an effective and competitive air transportation system. American Airlines, whose merger with US Airways was blocked by the U.S. Department of Justice this week, muddles along with some of the same Boeing 767s and MD-80s that it took delivery of during the Reagan administration; competitor Delta still operates DC-9s dating back to the Ford and Carter presidencies.

America’s major airports, many of which are still owned by cash-strapped local governments and thus unable to seek other sources of funding for much-needed modernizations without having to meet a long list of political considerations, are no better off. International-to-domestic and international-to-international connections for which one can confidently budget 90 minutes at Amsterdam or Singapore are reported to be taking up to four hours at major U.S. hubs. The economic cost of delays, cancellations and missed connections at these hubs: an estimated $15.3 billion.

But does this mean that affordable mass air travel is necessarily over? No.

True, the consolidation of the North American airline industry into just a handful of large players means that $99 deals will be even more difficult to find. But consider this: you can fly to the opposite end of the world and back for the price of a sofa. To previous generations, that would have been unimaginable.

That freedom to travel further for less might be about to get a boost thanks to technological advances.

If you’ve ever flown Air Canada’s Winnipeg-Toronto route, there’s a good chance you will have ended up on an Airbus A320 at some point. Despite the controversy that dogged the Mulroney government when the then-government owned Air Canada purchased 34 of the jets in 1988, it was a smart purchase: compared to the Boeing 727s that it replaced, the Airbus A320 burned only half as much fuel per mile.

After a quarter-century in service, Airbus has found a way to make the Airbus A320 even more fuel efficient. The newest generation of the aircraft, to be called the A320neo, is expected to have a range of about 4,200 miles (3,700 nautical miles, or 6,800 kilometres) when it enters service about two years from now.

Rival Boeing is also developing a Boeing 737 Max which will have the same range, and which will be similar in size to WestJet’s current Boeing 737s when it debuts in about 2017.

Either aircraft would, theoretically, be able to fly non-stop from Winnipeg to Honolulu or Paris.

One early customer is Norwegian Air Shuttle, which has ordered 100 Boeing 737 Maxes. You probably haven’t heard of Norwegian, but that could change: the company that started out flying regional routes in Scandinavia 20 years ago has ambitious plans.

The Oslo-based airline already offers enticingly low long-haul fares: some New York-Oslo round trips in October sell for as little as $604 U.S. after taxes and surcharges; a January New York-Bangkok round trip via Stockholm outbound and Oslo on the return sells for a reasonable $1,413. (Luggage fees and meals are extra.)

United Airlines, by comparison, charges $300 more to fly the same New York-Oslo route and back on the same dates, and charges about the same price as Norwegian on the Bangkok trip, but for a considerably longer outbound trip with stops en route in San Francisco and Tokyo.

When Norwegian’s new, smaller Boeing 737 Maxes enter service, they will be able to fly nonstop from the Oslo hub to any major city in Canada except for Vancouver and Victoria, and any U.S. city north and east of a line extending roughly from western Montana to the Carolinas.

After stopping and refueling, the same aircraft will be able to continue on to anywhere in Europe, the northern half of Africa, to the Middle East or to the northern half of India — all destinations that will be of interest to Winnipeg’s growing migrant community.

While it’s improbable that Norwegian will start direct service to Winnipeg — larger and more touristy markets will be first in line for service — the airline has been willing to enter codeshare agreements with other carriers, offering the possibility that Winnipeggers will be able to fly Air Canada or WestJet to Calgary, Toronto or Montreal and then transfer to a Norwegian flight at a relatively low add-on fare.

(For example, the difference in price between a direct Toronto-Warsaw round-trip flight on Poland’s LOT airline in October, and the same flight from Winnipeg, with the Winnipeg-Toronto/Toronto-Winnipeg legs operated by Air Canada, is the $283 that Air Canada apparently collects for acting as a taxi service — far below the normal Winnipeg-Toronto round trip price.)

The advent of smaller aircraft with the kind of range once reserved for jumbo jets could also bring new competitors to Canada.

For example, Portugal should be an attractive destination for Canadians due to its pleasant climate, scenery and coastal setting. But getting to Portugal is the problem: virtually all single-ticket itineraries between Winnipeg and Lisbon involve either early morning flights, tight connections, long connections, bad airlines or bad airports; sometimes even a mix of three or more of the above.

But what if Air Canada or its Star Alliance partner, TAP Air Portugal, which doesn’t fly to Canada, started a Toronto-Lisbon service requiring only one connection from Winnipeg using smaller jets?

Say goodbye to connecting through the United States or to having to make connections in out-of-the-way places like London, Amsterdam, Frankfurt or Paris.

Similar services could conceivably be launched to other popular destinations that currently only have seasonal or charter service, if any service at all, from Canada: Prague, Dublin, Berlin, Copenhagen, the south of France, even Croatia (which might be just within reach from Montreal).

Holiday operators, such as Sunwing or Air Transat, could also offer a wider range of destinations from Winnipeg if they ever purchase either aircraft.

Some will dislike the increasing use of narrow-body jets for trips of more than six hours in length; but will accept them as long as the price and the schedule are right. The growth in competition that new airlines flying to Canada could bring, using a long-haul aircraft that can make a profit with relatively small passenger loads, will give travelers access to both better schedules and reasonable prices. Don’t declare the era of affordable travel for the masses dead just yet.


About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

One Response to Era of cheap fares over? Yes, and no.

  1. Yer Pal says:

    I’m from Winnipeg. What the heck is this cheap fare thing you speak of?

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