Holiday Season to Be a Bumpy Ride for Airlines
More Americans will travel during the upcoming holiday season but will avoid the tarmac as the year winds down and the holiday decorations light up.
"For the Christmas and the New Year's holidays, we see travel up slightly from last year," said Shane Norton, director of travel and tourism analysis for IHS Global Insight. "Economic factors are improving certainly over last year, but we're not seeing a level of economic growth and more importantly consumer confidence that’s going to increase that level."
Current economic conditions are not deterring the majority of holiday travelers — 59 percent of Americans intending to hit the road say the economy will either have no impact on their plans or that things have improved for them, according to a recent AAA report. This number is down from 67 percent of Americans last year who felt that the economy was not impacting their holiday plans.
But travelers may be looking for the thriftiest way to arrive at their destination. AAA forecasts that 91.9 million Americans will travel 50 miles or more during the holiday period, a 1.4 percent increase from last year although air travel is expected to drop 9.7 percent.
"They’re putting family and friends above finances this year — above frugality," said Heather Hunter, a public relations manager at AAA. "We saw that again at Thanksgiving."
AAA estimated a 4-percent increase in travel during the Thanksgiving holiday weekend.
Although economic expectations have improved recently, there is not as much pent-up demand as there was at Thanksgiving to greatly increase travel demand during the upcoming holidays, Norton said.
Travelers will need to dig deeper into their wallets this year, with travelers spending a median of $718, a 3 percent increase from last year. Fuel and transportation costs will account for about a third of this figure.
"It's a positive sign for the travel industry that so many Americans are planning to travel this holiday season, collectively contributing to the second-highest year-end holiday travel volume in the past ten years," said Bill Sutherland, vice president at AAA Travel Services.
Additionally, once consumers arrive at their destinations they may be more willing to dine out or spend on entertainment, said Marisa Schneer, a spokesperson for American Express , which recently polled consumers about their travel plans.
The projected increase in holiday travel echoes the more upbeat tones of the National Retail Federation's recently increased forecast for holiday retail sales, which calls for a rise of 3.8 percent this year to a record $469.1 billion.
Transportation’s Winners and Losers
However, Americans are still stretching their holiday travel dollars.
"I think people are kind of retreating to ways of traveling that are more convenient and enable them to have more control over their budget," Norton said.
About 91 percent of holiday travelers will choose to travel by car this season, a 2.1 percent increase from last year, the AAA report said. But they will be passing through baggage claim less. Air travel is expected to fall 9.7 percent from last year, and account for about 6 percent of holiday travelers.
"If you’re traveling as a single person, it could be more cost effective to fly, but if you’re traveling with a family of four, cars are generally going to offer you a more affordable means to travel," Hunter said.
Jet fuel costs and capacity cuts are driving holiday airfares higher, with ticket prices expected to soar 21 percent compared to last year, according to the AAA’s Leisure Travel Index. Aviation jet fuel prices, which are contributing to rising ticket prices, have increased 19 percent since last year, according to the International Air Transport Association.
Airlines' tight margins force them to choose between increasing fares or cutting expenses by reducing the number of flights offered, said Victoria Day, manager director of communications of Airlines for America.
"Commercial aviation drives more than $1.2 trillion in economic activity, or more than 5 percent of U.S. GDP each year," Day said. "With razor-thin margins, U.S. airlines simply can't shoulder the burden of additional federal taxes. In addition, excessive speculation on oil and related commodities has contributed to a degree of price volatility that cannot be effectively managed by energy-intensive industries such as aviation and trucking."
The trends are giving rise to alternative modes of travel, such as buses and trains, which are expected to see a 4.2-percent jump during the holiday season.
Choosing alternative modes of transportation is not the only way to stretch a budget this holiday season, Hunter said. Although travelers should plan ahead to get the best deals, there are still discounts available for the procrastinator. She advised looking at discounts offered through certain employers and travel organizations in addition to asking for freebies.