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Air Service To Puerto Rico Takes A Nosedive*

A drop in business travel and high fuel prices push airfares higher


September 13, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

Air service is suddenly shrinking.

Stunned by a sharp drop in business & leisure travel, major airlines are running fewer daily flights from San Juan today than they were a year ago.

Compared to last year, scheduled air service to the mainland U.S. and the Caribbean has dropped anywhere between 6% and 15%. Scheduled jet service to international destinations has been cut by 30% compared to last year. Today, scheduled, non-stop service to Europe from San Juan is limited to Madrid, Spain.

As the economy weakened, precipitous cuts by companies in travel spending caught the airlines off guard. The optimistic promise of a turnaround in late 2001 doesn’t seem to be materializing. And no one in the industry is willing to make a guess right now as to when things will hit bottom and begin to recoup.

In the second quarter (2Q) of this year, ended June 30, the airlines lost more money than they did during the Gulf War and early 1990s recession. The Air Transport Association said the top 10 carriers lost $746 million in 1992. But they estimate the group’s net loss was a total of $775 million in 2Q 2001, including a special $430 million charge American Airlines (AA) took for depreciating some aircraft.

Business travel is airlines’ lifeblood. Traditionally, about half of all airline trips are business-related, while business-travel spending accounts for about two-thirds of airline revenue. That’s because business travelers tend to buy tickets closer to their travel dates and therefore pay more, than leisure fliers do.

In Puerto Rico, airlines are also feeling the pinch of the demise in business travel, along with the recent skyrocketing price of fuel that has caused airfares to rise. While the increases in fuel costs seem to have leveled off, the rest of the picture is still a bit gloomy.

"Companies are buying cheaper fares and planning their trips ahead of time due to the slowdown in the economy," said Michael Luciano, district sales manager for Delta Air Lines in Puerto Rico. "More consumers are purchasing promotional airfares and fares that have 7 to 14 days purchasing restrictions."

Airline experts interviewed by CARIBBEAN BUSINESS say airfares appear to be higher this month than they were during the same period last year due to the fact that major carriers began offering their September sale fares three weeks earlier. Normally, airlines drop fares 25% to 35% below their original price starting on Sept. 15. This year, the sale fares began in early August in order to stimulate travel during their slowest months--September and October.

According to official Airline Guide September figures, the seven major airlines that provide scheduled jet service to the island from domestic destinations offer 52 daily flights with 9,969 available seats. That’s five fewer flights and nearly 606 fewer seats than those available in September 2000, a decrease of 7.1% and 5.7% respectively. Delta Airlines was the only carrier this year to add a new domestic flight to Cincinnati.

Flights dropped includes one daily departure each to Ft. Lauderdale and Orlando by Trans World Airlines (TWA), one AA flight to JFK Airport, and one flight to Pittsburgh by US Airways.

Most of the decrease in flights from San Juan is a result of the ongoing merger between AA, the island’s dominant carrier, and TWA. The process, which began on March 1, should be partially completed by year’s end. The consolidation has basically allowed AA to control airfare rates in the local market and has caused a number of changes in its San Juan flights.

Jose Luis Pla, district sales manager for US Airways in San Juan, said all airlines are hurting--not only in the travel business segment, but in the leisure market too.

"In other markets, airlines are downsizing from big jets to small regional-service jets in an effort to cut losses," Pla said. "This effort isn’t happening in Puerto Rico, we are still using our Airbus fleet." Faced with lower traffic because of softer demands in the absence of smaller jets in the fleet, an airline’s only choice is to cut the number of flights.

Earlier this year, United Airlines had planned to merge with US Airways, but the proposed merger agreement fell through in late July after U.S. Department of Justice determined it should not happen.

"We [US Airways] have had to turn to Plan B after the proposed merger with United fell through," Pal said. "US Airways plans to add more flights in December to the Caribbean to become the second largest airline serving that market." The expansion plan does not include Puerto Rico.

Effective Dec. 9, US Airways will add flights from its hubs in Philadelphia and Charlotte to Barbados, St. Lucia, St. Kitts, Antigua, Cozumel, and Bahamas as well as a second flight to Aruba.

In the regional service (turboprop) category, scheduled daily flights for the month of September also took a nosedive from 64 departures in September 2000 to 54 departures in September 2001, a 15.6% decrease. Daily seats available also dropped from 1,921 seats in September 2000 to 1,638 seats this year.

American Eagle was responsible for dropping two daily flights to Ponce and one daily departure to St. Thomas. But, this year the carrier added two daily departures to St. Croix, which were dropped by Gulfstream International Airlines, a former subsidiary of TWA. Gulfstream eliminated 12 flights this year to St. Thomas, while Vieques Air Link got rid of its three daily flights to Vieques.

On the other hand, Cape Air added five new flights to Ponce this year and added one daily departure each to St. Croix and St. Thomas.

Scheduled jet service to international destinations has also plummeted in comparison to last year. The number of flights per week dropped from 96 departures last September to 67 weekly flights in September 2001, a 30.2% cut.

Martinair Holland eliminated its two weekly flights to Amsterdam this year, TWA dropped its seven flights to Aruba, Avianca eliminated its three flights to both Bogota and Frankfurt, while Condor Flugdienst also dropped a flight to Frankfurt. ACES eliminated one flight to Santo Domingo this year and Copa dropped seven flights to that same destination, while TWA also phased out its 14 flights to Santo Domingo.

Meanwhile, Air Plus Argentina began new scheduled, non-stop service to Buenos Aires and Punta Cana under an incentives arrangement promoted under the now defunct Government of Puerto Rico Open Skies Initiative.

As for weekly regional service to international destinations, there were 623 weekly departures in September 2000 compared to the 526 flights scheduled this month, a 15.6% decrease.

Gulfstream dropped 56 weekly flights to Beef Island and LIAT eliminated 10 weekly flights to the same destination. American Eagle phased out seven flights to La Romana and Dominair also cancelled three weekly flights to La Romana.

Air Caraibes dropped four weekly flights to Pointe-A-Pitre and American Eagle eliminated seven flights to that same destination. American Eagle dropped one flight to Puerto Plata and Air Caraibes eliminated three flights to St. Barthelemy.

Further, Gulfstream dropped 86 weekly flights this year to St. Martin while American Eagle picked up 14 weekly flights to that destination. American Eagle phased out its seven weekly flights to St. Vincent and Gulfstream eliminated its 14 weekly flights to Virgin Gorda.

"We anticipate business will get better come November," Pla said. Traditionally, November marks the beginning of tourist season in Puerto Rico as well as time for holiday travel for families who have loved ones in the States.

*CARIBBEAN BUSINESS goes to press on Mondays, therefore the articles in this edition do not reflect the terrible events occurring in New York City and Washington, D.C. on September 11, 2001.

This Caribbean Business article appears courtesy of Casiano Communications.
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