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Chris Jones

Fliers Find Vegas Value

29 July 2004

LAS VEGAS -- Despite a surge in ticket-buying travelers, heated competition within the U.S. airline industry actually drove down the cost of flying to and from Las Vegas earlier this year.

And thanks to a continuing glut of available seats, those bargain rates should continue indefinitely, airline sources said.

The U.S. Department of Transportation on Wednesday released a report that compared changes in the average amount carriers charged passengers who visited the nation's 85 largest air markets in this year's first quarter.

And though McCarran International Airport had a more than 1 million passenger increase in that three-month span, its average fare still fell by more than 4.3 percent vs. 2003, the department's Bureau of Transportation Statistics reports.

Only three other markets studied -- San Juan, Puerto Rico; Santa Ana/Orange County, Calif.; and Boston -- showed larger percentage decreases, and DOT spokesman Dave Smallen attributed Las Vegas' pricing regression to the so-called "JetBlue effect."

"When JetBlue enters a market, they have low fares and other airlines lower their fares to match the competition," Smallen said, referencing Kew Gardens, N.Y.-based JetBlue Airways, which operates seven local round-trip flights per week to New York and Long Beach, Calif.

Still, it's unlikely one carrier's limited schedule would single-handedly shift fares marketwide. JetBlue spokesman Gareth Edmondson-Jones said Wednesday he believes prices dipped from widespread fare wars involving carriers such as Southwest Airlines, America West and others.

"This year is one of the most competitive in memory," Edmondson-Jones said.

"The low-cost carriers are expanding and the legacy carriers are fighting back, so there's sort of one-upmanship in undercutting fares."

Increased demand for a product often precedes increased prices, but Janice Monahan, spokeswoman for Tempe, Ariz.-based America West, said even an 11.9 percent jump in quarterly passengers wasn't enough to negate McCarran's vast increase in service.

"The issue is capacity," Monahan said. "A number of airlines have added service using bigger planes with more seats, and they're going to more destinations. ... There's still too much supply."

McCarran's March capacity increased from 60,793 daily departing seats a year ago to 71,010 seats this year, airport data showed. Over a 90-day period, those added seats made it possible for 1.8 million additional travelers to fly here during this year's first quarter. Only 1.03 million did.

JetBlue's Edmondson-Jones also said Las Vegas' quarterly fare decreases likely encouraged more people to travel here, though not enough to counter the pricing effects caused by excess capacity.

The Air Travel Price Index is based on the itineraries of travelers who flew through select markets during three-month reporting periods. It uses the first quarter of 1995 as a base, with subsequent scores indicating whether fares increased or decreased in each quarter.

For example, Las Vegas' first quarter 2004 score was 120.92, which meant air prices here were roughly 21 percent above those from the same period in 1995.

Last year's first quarter score was 126.38, however, which shows local fares dipped by 4.3 percent from a year ago.

The national average increased by 0.6 percent to 108.6 in this year's first quarter, its highest point since first quarter 2001, the report said.

Overall, McCarran processed nearly 9.7 million passengers from January through March. Through June, that figure climbed to 20.3 million, a 15.2 percent increase from the first half of 2003.

The bureau's report on fare changes in this year's second quarter will be released in October.