Travel

Playing the airfare game

Travellers try to beat the odds

D’ARCY JENISH March 23 1998
Travel

Playing the airfare game

Travellers try to beat the odds

D’ARCY JENISH March 23 1998

Playing the airfare game

Travel

Travellers try to beat the odds

D’ARCY JENISH

Jean-Marie Tardif is sitting in the departure lounge at Montreal’s Dorval Airport, with one of those cat-thatswallowed-the-canary smiles on his face. The reason for his satisfaction? “I’m flying back-to-back,” confesses Tardif under his breath, leaning forward to display the Montreal-Toronto ticket in his hand. Tardif, a lighting technician with a Montreal manufacturer who often spends two weeks each month in Toronto, is one of those frequent flyers who knows how to skirt the rules and buy heavily discounted seat-sale tickets normally reserved for leisure customers. He also knows that many North American airlines have cracked down on travel agents selling back-to-back tickets. And no wonder: just consider the economics of Tardifs travel. Over the past month, he had to make two Montreal-Toronto roundtrips, and at full-fare economy would have paid $1,164. But by purchasing two sets of tickets at seat-sale prices—the so-called back-to-backs—he was able to avoid the weekend layover, a common requirement for lower fares, and paid only $594. The net saving to Tardifs employer: $570.

Back-to-back ticketing is one of the most popular methods of beating the system. Tardif bought two discounted tickets, each requiring a weekend layover. He used an outbound Montreal-Toronto coupon for the first of his two trips. To return home for the weekend, he used the Toronto-Montreal coupon from his second ticket. Later, he flew to Toronto using the return coupon on his second ticket, and flew home using the return portion of the first ticket.

The attraction of back-to-back ticketing is obvious when flying full fare to Halifax or Vancouver, or anywhere in between, typically costs four to five times as much as catching a seat sale. And with a little ingenuity, many others are learning to beat down the cost. Take Winnipeg dentist Allan Osborn, 60, who wanted to fly to Fort Lauderdale, Fla., in February. His travel agent quoted

him a price of more than $1,200 return. Instead, he flew to Toronto on frequent flyer points, caught a charter, and arrived at his destination for $350.

Even travel agents find ticket prices perplexing. For starters, the airlines do not publish their fares on a regular basis because they change so often. Some industry experts say airline ticket pricing now operates like a giant stock market. This country’s two major scheduled carriers, Montreal-based Air Canada and Calgary-based Canadian Airlines, offer multiple fares, sometimes a dozen or more, on most of their hundreds of daily flights. Fares can change several times a day, and the two airlines watch each other’s pricing like street corner rivals selling discount gasoline. If one launches a seat sale, the other almost invariably matches, within hours.

The airlines must match wits not only with each other, but with the public as well, as they keep finding clever ways to cut their costs. When one Canadian carrier offered a Montreal-Seattle promotional fare for less than the cost of flying from Montreal to Vancouver, some travellers bought the cheaper ticket to the American city, but got off the plane during the Vancouver stopover, a prac-

tice known as “hidden cities.” But the gimmick that most troubles the airlines is backto-back ticketing, which has been very popular with corporate travellers over the past five years, according to Ron Pradinuk, who owns a Winnipeg business called Renaissance Travel and is a vice-president of the Association of Canadian Travel Agents. Within the past six months, Air Canada has issued debit memos to several agents who sold back-toback tickets, and several have complied with the airline’s demands that they make up the difference between the seat sale and full-fare prices. “Corporate clients are calling and saying they want these tickets,” says Pradinuk. “It’s putting us in a terrible bind.”

Airline executives insist that every dollar of revenue is crucial to their bottom lines be cause the industry is notoriously unprofitable. Late last month,

Canadian Airlines announced a year-end profit of $5.4 million, a major improvement over the previous

TIMING IS EVERYTHING

Two upcoming flights in April offer a variety of fares

FARE CLASS

PRICE TERMS

(excl. tax)

BUSINESS $2,682

ECONOMY $2,292

7-DAY ADVANCE PURCHASE $855 14-DAY ADVANCE PURCHASE $501 NIGHT FLIGHT $355

No Restrictions No Restrictions /365

MMÉ| /30 /90

CANADIAN AIRLINES

TORONTO-VANCOUVER RETURN

pnÉl/30

Indicates flights requiring Saturday stay over and number of days ticket valid

five years when the company lost a total of $1.3 billion, and in late 1996, came close to going under. Air Canada, meanwhile, enjoyed its fourth straight profitable year, earning a company record $427 million. But between 1990 and 1993, the company’s cumulative losses hit $1.1 billion. “The trick is to get as much revenue as possible from every flight,” says Rupert Duchesne, Air Canada’s vice-president of marketing, “because airlines are a great way to lose money. If you look at the past 50 years, worldwide, this business has lost money.”

Craig Landry is on the front lines of that battle to stay profitable. Arriving at work on a Monday morning, he is happy to see that Canadian Airlines has made only a few minor fare adjustments over the weekend. Landry is a pricing analyst in Air Canada’s 68-member revenue management department, the place where ticket prices are set and seats allocated by fare class on each of the airline’s 680 daily departures.

Landry, who works in a small cubicle on the cramped fifth floor of the company’s Montreal headquarters, begins every working day by logging on to his computer and checking what he calls “the overnight tape from ATP Co.,” the Washington-based Airline Tariff Publishing Co. From Monday to Friday, every scheduled carrier in North America can electronically file fare changes. At 10 a.m., 12:30 p.m. and 8 p.m., ATP Co. relays the information to travel agents worldwide.

On a recent Friday morning, Landry and his colleagues discovered that Canadian had launched a continent-wide seat sale overnight and filed more than 35,000 changes to the terms, conditions and prices of its tickets. Air Canada’s revenue managers matched, and in some cases bettered Canadian’s offerings, racing to complete the job in time to file their changes with ATP Co. before 10 a.m. “We had a huge amount of work to do,” said Landry. “But we can’t afford to have Canadian out in the marketplace with prices lower than ours.” To do so is to risk losing reservations. A bargain-hunting consumer travelling from Toronto to Vancouver return in early April can choose from nine discounted fares on the two major airlines, ranging from $355 to $1,813, depending on

READY FOR TAKEOFF

Passengers by fare category on a typical long-haul weekday

meticulously track the sale of seats on every flight for months before departure. Their objective is to sell as many full-fare tickets as possible, and they use sophisticated software programs to predict how many can be sold at every fare category based on such factors as the history of a flight, economic growth, currency fluctuations and special events. In the months leading up to departure, seat allocation can change more than a dozen times. If the high-priced seats are selling quickly, the number of discounted ones are reduced. Likewise, if full-fare sales are sluggish, cheap seats are in better supply.

But airlines will always make room for the last-minute, full-fare passenger—even when a flight is sold out. Air Canada and Canadian routinely overbook because a certain percentage of passengers will not show up. When an aircraft unexpectedly fills up, seatsale passengers are offered cash vouchers to change their plans. “They’ll come right on the plane five minutes before departure offering $100, $200, $300,” says Michael Merrithew, president of Uniglobe Advantage Travel in Toronto. “The discount passenger can travel free on the next flight and they’re still ahead.” The price of full-fare tickets has forced many businesses to examine their travel costs. According to a recent survey of more than 700 firms by American Express Canada Inc., Canadian companies spent an estimated $4.7 billion on air travel last year, up from $4.3 billion in 1994. During that period, the number of companies trying to rein in travel budgets

15 full-fare economy class ____5%

weekend stay requirements. The last-minute traveller, or the person who wants a ticket without stayover requirements or any other restrictions, will pay $2,292 for economy or $2,682 for business class. “Those are the fares airlines live and die on,” says Barbara Amster, Canadian’s senior vice-president of sales and marketing. “The discounted seats are the ones that probably won’t sell. If we can get anything for them, we’re better off than having an empty seat.”

48 per cent, the survey revealed. “These costs are very high,” says Pamela Arway, a senior vice-president with Amex Canada. ‘They’re rising, and they’re often quite inefficiently managed.” Many large companies, such as chartered banks, which spend as much as $50 million a year on fares, are realizing huge savings by negotiating discounts directly with the airlines. Some firms, adds Merrithew, now prohibit their employees from travelling business class on flights under three hours in duration. Others insist that staff members make their reservations well ahead of departure to get advance booking discounts. “When you know there’s a high probability of your being able to travel,” says Merrithew, “waiting until the last minute is unacceptable behavior in today’s corporate world.”

But for all the complexities of ticket pricing, airline executives still live by some simple, iron-clad principles, which they repeat with mantra-like frequency. “An empty seat is the most expensive one,” says Canadian’s Amster. “All the costs are still there, but you’ve lost the opportunity to sell it.” Judging by their bottom lines, both Canadian carriers are learning how to win. □