Airline Rivalry at DIA Keeps Fares Low

Airfares continued their upward march this week when Southwest Airlines raised one-way ticket prices by up to $10, triggering similar increases at most major carriers.

But travelers in Denver are seeing some of the lowest fares in years, thanks to a new era of competition in the Mile High City.

Leisure fares to and from Denver International Airport last week were down 11 percent from a year ago, according to data from New York-based industry consulting firm Harrell Associates. That compares with a 9 percent increase nationwide on a year-over-year basis. Business fares at DIA were up only 3 percent vs. a national increase of 13 percent, the firm said.

And although Southwest increased fares across its system this week, it did not boost prices on any of its flights to and from Denver, meaning its rivals didn't either.

"Business and leisure fares overall are definitely higher than a year ago across the country," said Bob Harrell, principal of Harrell Associates. "But Denver is bucking the trend in the lower direction in both cases."

Chalk it up to the city's status as a battleground for three airlines - United, Frontier and Southwest.

It's an enviable position for Denver, considering many cities are lucky to have only two major airlines competing for market share.

All three major airlines duking it out in Denver also plan to increase their presence at DIA in coming months, signaling that fares could fall even further.

Denver's largest carrier, United Airlines, recently emerged from bankruptcy and has announced plans to add 32 daily departures from DIA this summer. The move involves new flights on both its main service and its low-fare arm, Ted, which is based in Denver.

The city's second-largest carrier, homegrown Frontier Airlines, will increase daily flights to 20 cities, start three new U.S. routes and make its first foray into Canada by launching service to Calgary, Alberta.

Low-cost king Southwest, which started service in Denver in January, added two new nonstop destinations this month and is looking to secure a fourth gate at DIA for even more flights.

"The presence of Southwest in the market, the fact that United is out of bankruptcy and Frontier's great success here are three components that have led to more competitive fares," said Eugene Dilbeck, executive director of the Center for Travel and Tourism at the University of Denver's Daniels College of Business.

Dilbeck noted that fares into and out of Denver have traditionally been higher than in other major cities, so the recent price decreases are starting from a relatively high base.

"But it's still very encouraging to see fares go down," he said.

Southwest's arrival helped bring down fares by up to $100 on some routes. United doesn't break out fare information for Denver, but Frontier's average one-way fare in February was $98, compared with $101 a year ago, a 3 percent decline, according to company data.

Travelers certainly are taking advantage of the lower fares: In January, overall passenger traffic at DIA increased by 8.3 percent, compared with the same month in 2005.

Nationwide, airfares have been creeping up after hovering near record lows for several years. Airlines pushed through multiple fare increases last year to help offset high oil costs. Still, fares overall - especially those for business travel - have remained low.

But fuel prices are starting to take their toll on the major discount airlines, a sign that there will be more fare hikes in the future, observers say.

Southwest, for instance, said it was forced to raise fares specifically because of high fuel costs. The carrier has contracts that lock in the fuel price, and that has largely sheltered it from rising oil prices. But those contracts are starting to expire and will continue to do so during the next few years. Southwest expects its fuel costs to rocket $600 million this year alone.

"It's all about fuel," Southwest spokeswoman Paula Berg wrote in an e-mail. "History proves that we give thoughtful consideration to fare moves. Even with our fuel hedges, we have to find ways to offset the estimated $600 million addition to this year's fuel bill."

Although experts say fares nationwide likely will rise at least 10 percent this year, Denver could continue to buck the trend as the city's major airlines expand and compete for customers.

Still, local consumers should consider booking tickets for summer travel soon, said Tom Parsons, who runs Texas-based travel site Bestfares.com. Prices always rise during the busy summer months, when overall demand balloons dramatically. While fares from Denver this summer might be lower than they were a year ago, they'll certainly be higher than they are right now, Parsons said.

"If you are a gambler and you don't care where you want to go, you could probably wait and find some good deals," Parsons said. "But if you're trying to go to a specific destination at a specific time, I'd strongly start considering buying before Memorial Day."

INFOBOX

Why fares fell

* Eugene Dilbeck, executive director of the Center for Travel and Tourism at the University of Denver's Daniels College of Business:

"The presence of Southwest in the market, the fact that United is out of bankruptcy and Frontier's great success here are three components that have led to more competitive fares."



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