The Interview: Rick Seaney, CEO, FareCompare.com
With the economy in free fall and airfares stratospheric, it seemed like a good time to talk to Rick Seaney. He’s one of the founders and the CEO of FareCompare.com, one of the most enlightened search engines on the web. FareCompare’s killer app is tracking down the cheapest fares faster than anyone else. And what seems to be his total immersion in the business of airfares has turned Seaney into one of the country’s leading experts on the airlines. As we head into 2009, I asked Rick a bunch of questions about the state of the airlines, cheap fares and whether we could expect any relief from high prices and crowded planes. And of course, about nailing that elusive business class seat without paying a small fortune. Biggest surprise? That flight to Europe may not cost as much as you think.
Wow! Great question (and the first one at that) for someone whose companies’ software tracks millions of airfare price changes weekly — one would think I would be a decent prognosticator. Is the DOW going to be at 7,000 or 12,000, is oil going to be at $60/barrel or $140/barrel — those two answers would make my answer a bit easier. Given those very volatile unknowns here are the trends I see in airfare prices for 2009.
Airfare prices for International travel (especially premium cabins) and domestic business travelers are likely to come down next year
We had 21 attempted airfare hikes in the first half of 2008 (almost one a week) and none — nada — since July 4, this tells me that base airfare prices are close to being maxed out.
My sense is that oil is more likely to hit $60/barrel than the $200/barrel predicted by Goldman Sachs earlier this year. International airlines have already begun dropping fuel surcharges and I expect U.S. airlines to follow suit albeit at a much slower pace as they struggle to repair their balance sheets.
Domestic business travelers have absorbed the bulk of airfare increases and higher fuel surcharges. Normally the retraction of network legacy airlines back into their fortress hubs would not bode well for business travel prices but I think the recent financial crisis is going to outweigh the airlines capacity cuts (we are losing 10 years of domestic U.S. aviation growth). I expect a significant hit in major corporations travel spend in 2009 which should force some discounting. Just this past week Southwest announced it would start flying out of Northwest Airlines (soon to be Delta) hub in Minneapolis in March 2009 which will drive down business prices by more than half on the initial route to Chicago.
I expect airfare prices to increase for small cities and leisure destinations like Las Vegas and Orlando. Small cities will continue to take it on the chin in 2009 (many of these cities have lost service altogether). Competition is the main driver of price and these small cities have had competitive airlines pull out, which drove up prices.
Leisure travelers have gotten used to super cheap prices for the past decade to locations like Las Vegas and Orlando those days are gone, with less seats and volatile oil prices airlines can easily lose money on full flights with leisure passengers used to paying $200 roundtrip
How about the Caribbean. There have been so many cutbacks from American Airlines in terms of service, I’m assuming that getting to the islands is going to cost us all a lot more.
Certainly seat cutbacks on American Airlines in Miami and San Juan along with US Airways Caribbean gateway Charlotte will keep planes full providing pricing power for the airlines in 2009. Southwest Airlines has expressed interest in expanding internationally (recently they inked a code share deal with Canada’s WestJet) and obvious choices for them are Mexico and the Caribbean — however this is likely to be 2010 and beyond. More interesting to me in 2009 is whether or not resort destinations in the Caribbean will "subsidize" air travel in order to get people to their facilities. The downstream effects of leisure cutbacks to hotels and resorts are potentially devastating. We have seen this subsidy behavior before from seasonal ski resorts like Vail and Durango and I think this trend might continue to highly trafficked leisure destinations that have seats cut back drastically by airlines because they are not profitable.
Is there any foreign destination that hasn’t been affected that much, a place that’s still relatively cheap for Americans to fly to?
Oddly enough Europe is likely to be the cheap air travel location of 2009. Outside of the weakness in the dollar, air travel is should be much cheaper for several reasons. There has been a multi-year retraction by network legacy airlines domestically as they began to place more eggs in the more lucrative international markets. In March 2008 we had the first wave of the "Open Skies" pact between the U.S. and Europe kick in with a rush to London Heathrow initially, but may also bring us low cost trans-Atlantic airlines like Ryanair who just today announce they wanted 18 pound fares over the pond. This winter we are seeing tons of $30 each way base airfares to London from the east coast, with taxes at $140 and fuel surcharges averaging $345 the total trip cost is under $600. With fuel surcharges likely to go down by $200 or more we should see cheaper prices.
Finding a cheap domestic deal in 2009 is mainly about technology sprinkled in with education and a bit of luck. Finding a cheap seat is going to be harder than ever in 2009 so let me walk through the basics.
1.Quit Procrastinating — most domestic tickets are sold inside of 30 days before departure and many inside of 20 days before departure. Airlines start to manage their cheap seats about 4 months before departure and that is when deal sleuths should start shopping (not necessarily buying). If you shop too early you will overpay as airlines don’t typically release the cheapest seats until this 4-month window and legacy network airlines raise prices substantially outside of Southwest Airlines booking window of 180 days.
2. Be Flexible — the cheapest days to travel are Tuesday, Wednesday and Saturday. The cheapest times during the day to travel are when no one wants to fly (first flight out, after lunch and dinner). Stay away from peak holidays (every consider Thanksgiving in October it could save thousands for a large family that meets each year)
3. Consider Connecting — airlines are garnering a significant premium lately for non-stop flights in many markets. If possible stay away from connecting in New York, Newark, Chicago and Atlanta. The trade-off obviously is time vs. money.
4. Beware of Airline Fees — a checked or overweight bag or two can add well over $100 roundtrip to your flight. Pack light and included a sandwich also check airlines like Southwest that don’t have these fees.
5. Use Technology at FareCompare.com we send out millions of email alerts a month notifying consumers before anyone else of price drops — airfares sales are fewer and farther between being first to know puts you at an advantage
6. Use Miles for Last Minute Emergencies If that last minute emergency trip is going to ring the cash register for $1200 — use your miles, even with the last minute redemption fee, you can buy a ton of leisure tickets for $1200.
As I said, booking too early (except for peak holiday travel) is likely to cost you more than if you start shopping about four months before departure. Legacy network airlines allow you to purchase up to 11 months in advance and Southwest has about a six month booking window. Outside the Southwest booking window other airlines increase prices by $50-$150 roundtrip.
Any tricks for getting that elusive business class or first class seat without spending a fortune?
Where there is an empty seat there is always the possibility of discounting. At FareCompare.com, we were the pioneers of showing the over 100,000 discount first class airfares filed domestically called "Y-Ups." These are confirmed discount first class seats available before road warriors get automatically upgraded. Check them out on our site. Recently there have been quite a few premium business and first class cabin international deals showing up mainly because of the economic downturn and belt tightening. Just today, there were tickets on the only remaining "mostly premium" cabin boutique airline, Open Skies (New York to Paris $699 and Amsterdam $599 each way). I personally bought tickets for my family and father in law in June for travel to London on Continental from Houston for $1,500 roundtrip in their Business/First cabin (normally $4,000) or more (We are flying from Dallas to Houston on Southwest). Most international airlines now have a 42 or 50 day advance purchase first/business class discounted airfare and there are also quite a few last minute weekender deals
I’m looking at fares for President’s Week that seem 20 % higher or more, and yet it’s only early October. Any strategy — or destination, perhaps — that might yield lower fares or a better deal during that week?
It is a touch early for shopping that weekend (four-month rule) but I am not surprised by the higher prices. Airlines are really good at charging a premium for any type of holiday travel. The Valentine/President’s Day week in mid February typically has higher airline ticket prices to ski destinations and lower prices to warm weather destinations like Florida. Compared to Christmas/New Year Travel the Caribbean and Mexico beaches are likely to be a better deal that week as well. Certainly the days you pick are important and with a bit of flexibility you can save. If skiing is on your mind checkout the Canadian destinations they can sometimes be a better deal.
How many times do you fly a year?
About twice a month.
What won’t you leave home without — gear, gadgets, gizmos?
I never travel without my sound canceling head phones, IPod (with sidecar battery life extender), blackberry, small laptop (I have one I only use on flights), ear plugs for international flights and a good book. I haven’t checked a bag in over three years, even on weeklong international trips.
Now that we’ve adjusted to bag fees, and fees for slightly roomier coach seats, what’s next? What else might the airlines begin charging us for?
I am not sure "we" have all quite adjusted to these fees quite yet as even several years after the 3-ounce liquid carry-on rule we still have many that haven’t "adjusted". Certainly one fee we might welcome is internet on planes, we’ll see a lot of this in 2009. One thing I am not looking forward to is the use of cell phones in the cabin which is being tested now by Ryanair in Europe. It’s only a matter of time before it hits the domestic marketplace, even with polls showing overwhelmingly that travelers don’t want to deal with it. To be honest, the airline bean counters have studied every step of our journey from ticket purchase, changing our tickets, seat selection, pulling up to the curb at the airport, checking our bags, traveling with our pets, dining or snoozing and are charging a fee for the "privilege." Will airlines bring into play the $200/barrel of oil nuclear option of weighing passengers as they board? Let’s hope not.