Fares out of MSP are expected to climb

Article by: DAVID PHELPS , Star Tribune
Updated: July 23, 2012 - 10:33 AM

Citing fewer seats in the market, Carlson Wagonlit said 2013 Twin Cities airfares will jump 5.4 percent to 7.9 percent.

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There's no airfare relief in sight for passengers flying out of Minneapolis-St. Paul International Airport.

Tickets for flights out of the Delta-dominated hub are likely to rise 5.4 percent to 7.9 percent next year, according to the 2013 travel-price forecast released Monday by Carlson Wagonlit Travel.

The Minneapolis-St. Paul spike in airfare costs is double the 2.8 percent fare hike projected for the rest of the United States and Canada, the big travel company's report said.

Carlson Wagonlit, which specializes in business travel management, cited "continued capacity reductions" -- smaller planes and fewer flights -- as the reason for the expected higher fares out of the Twin Cities.

"With a reduction in capacity and an increase in demand, they [air carriers] can charge higher rates," said Brent Eisenach, one of the study's research directors. "Both effects are positive to the carriers."

The Twin Cities airfare data are contained in the travel manager's annual global forecast of business travel prices, including hotels and car rentals. The report concludes that prices in most travel categories "are expected to grow modestly" next year.

While forecasted average fare increases for MSP pertain to all carriers serving the Twin Cities, Delta remains the dominant carrier with 80 percent of the traffic and can set the floor for fares to markets where it has little or no competition.

A report last year by the federal Bureau of Transportation Statistics said MSP had the 11th-most-expensive average airfares among U.S. airports. That report said the $413 average fare in 2011 was 9 percent greater than fares in the first quarter of 2010. Detroit and Atlanta, two other Delta hubs with greater competition, ranked 43rd and 45th, respectively.

Domestic capacity -- the number of available seats -- at MSP is down 3.5 percent while passenger demand is up 2.6 percent, said Eisenach.

"There are a couple of low-cost carriers at MSP but, by and large, Delta has a strong hold of the Minneapolis market and they leverage that," Eisenach said.

Airlines began to ground planes to reduce capacity in 2008 and 2009 at the start of the Great Recession after oil prices soared above $140 per barrel in July 2008.

"Then they got a taste of profitability and became reluctant to reintroduce capacity when things got better," said Joel Wartgow, senior director of Carlson Wagonlit Travel's Solutions Group for the Americas. "Capacity constraints are here to stay."

The travel report also expects hotel rates in the Twin Cities to increase 1.8 percent to 4.1 percent next year as upscale hotels attempt to bring average room rates back to the pre-recession levels of 2008.

Average room rates throughout North America will rise 3.2 percent, according to Carlson Wagonlit.

But car rental rates in the Twin Cities will decline between 1.8 percent and 3.4 percent because of "intense competition" among automobile manufacturers and supplies. The North American rental market will decline by an average of 1.1 percent.

With a presence in more than 150 countries, Carlson Wagonlit Travel specializes in business travel management and business events and meetings.

Modest increases abroad

Globally, travel costs are expected to expected to grow modestly next year, the division of Minnetonka-based Carlson said.

Airfares in the Asia-Pacific region will rise by 2.5 percent while hotel rates will increase about 3.5 percent.

In Latin America, airline travel costs will increase by 1.3 percent and room rates will jump 6.3 percent.

Carlson Wagonlit said "continued economic uncertainty" in Europe, the Middle East and Africa will limit travel price increases in those regions in the coming year. Airfares are expected to climb 2.5 percent while room rates increase 1.3 percent.

"While slightly higher prices will be the reality again next year as demand for travel outpaces supply in most places, there is still plenty travel buyers can do to watch costs and take care of travelers through other measures, including how they influence traveler behavior," said Nick Vournakis, a senior vice president for the Carlson Wagonlit Travel group.

David Phelps • 612-673-7269

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