2014 forecast: airfares likely to remain flat

  • Article by: DAVID PHELPS , Star Tribune
  • Updated: July 31, 2013 - 10:21 AM

A 2013 fare increase at MSP failed to materialize as Delta added seats and demand for business travel softened, Carlson Wagonlit Travel reported.

Next year looks like another good one for Minnesota business travelers.

Airfares out of the Twin Cities in 2014 are expected to remain flat, much as they surprisingly have been in the first half of 2013, according to the annual travel price forecast compiled by Carlson Wagonlit Travel (CWT).

A sharp 5 percent fare increase projected for this year has so far failed to materialize, CWT analysts said Tuesday, and airfare trends for 2014 are trending along the same stable line.

Part of the reason? Delta Air Lines, the largest carrier serving Minneapolis-St. Paul International Airport (MSP), increased capacity in the Twin Cities market at the same time business demand declined, the analysts said.

“In 2013, Delta increased capacity by 3.9 percent. But in Minneapolis corporate demand softened and went down by about 2 percent,” said Brent Eisenach, a research director for CWT.

The reduced demand in both Minnesota and the U.S. was the result, in part, of continued economic uncertainty in Europe and the impact of government sequestration on the U.S. economy.

“There was a more conservative feeling about business travel by companies,” said Joel Wartgow, senior director of CWT Solutions Group for the Americas.

The CWT forecast predicts U.S. airfares could rise by 1.2 percent next year.

The travel industry division of Minnetonka-based Carlson attributed the slower rise in domestic airfares to greater competition between major carriers and the success of low-fare airlines.

“While airfares continue to rise, the increase is much lower than it has been over the past couple of years, driven by a highly consolidated and fiercely competitive landscape,” the CWT report said.

The international picture for airfares next year is more spotty.

The CWT analysis said it expects “moderate increases” in much of the world “with notable exceptions” in emerging markets such as Argentina.

“The airline industry remains dynamic in 2014 as carriers continue to align, whether through code-sharing agreements, alliances or mergers,” the CWT report stated. “At the same time, more low-cost carriers are entering the global stage, applying pressure on legacy carriers’ pricing and offering new products and services geared toward the business traveler.”

The CWT study is based on historic price behavior including the travel patterns of CWT clients and uses international economic data from a variety of government agencies to make pricing projections.

Hotel price increases

The study also includes hotel and car rental information as well as data on corporate meetings and events.

Hotel rates in the Twin Cities are projected to increase by 5.5 percent as strong demand allows the local lodging industry to raise room rates. Strong demand is also forecast worldwide except in Europe.

Interestingly, the CWT forecast notes that car rental rates in some parts of the U.S., including Minnesota, are expected to rise after two years of being flat.

“A lot of suppliers are less interested in market share and are more focused on higher rates,” said Wartgow.

The CWT report also notes that higher meeting and event costs likely will lead attendance to decline or grow in the low single digits.

David Phelps • 612-673-7269

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