FareCompare’s Seaney Sees High ROI on Greater Usage of Low-Cost Carriers

Rick Seaney, CEO of FareCompare, an independent airfare-comparison site, shared his insights on “cheap” airfares and their  applicability to the corporate travel arena with Travel Market Report editor Michael Billig. 

TMR: Why are low-cost carriers able to offer airfares at levels below those of the legacy airlines?

Rick Seaney: Low-cost airlines typically drive the price point on their nonstop routes; legacy airlines typically do follow and match. On legacy nonstop routes, however, they garner significant premiums, especially when they have a lock on convenient flight times.

TMR: Is airfare pricing directly dependent on competition levels?

Seaney: Competition is indeed the number one factor in airfare pricing; no competition, no incentive to discount. Keep in mind the legacy airlines have spent the last few years retracting back into their hubs and ceding share to LCCs. As such, legacies only worry on those routes they dominate the ‘pain point,’ that pricing level at which air travel demand wanes.

TMR: How about other transport alternatives, such as high-speed rail? Could it effectively dampen air-travel pricing?

Seaney: Certainly, cheap being the critical factor, high-speed rail would impact airline pricing in certain lucrative short-haul routes, like those along the California coast, the Texas quadrangle (Dallas, Houston, Austin, San Antonio) and the eastern shuttle area (New York City, Boston, Washington, DC). Oddly enough, high-speed rail in Europe has not prevented several low-cost airlines from thriving. They have built their business models to compete with rail, and many in Europe don’t take the train anymore, they hop on a jet.

TMR: Specifically addressing the effect, if any, of low-cost carriers and their corresponding cheap airfares on the business travel marketplace, why aren’t more corporate travelers taking advantage of this more bottom-line-friendly option?

Seaney: Airlines use advance-purchase and minimum-stay rules on airfares as the main way to fence business travelers into higher price points. They also use the convenience of numerous nonstops on popular routes as well as convenient departure and arrival times as a lure to consultants, who then pass on costs to their clients. Those same clients, however, are starting to push back on $1,000 roundtrip domestic tickets.

TMR: How can corporate travelers and agents exert greater control on airfare spending and lower the cost of this portion of the business trip’s requirements?

Seaney: As I see it, the way to keep down costs it is pretty simple: business travelers have to plan and shop earlier and quit treating every trip as though it was an emergency at the last minute! Additionally, if they want to save on air travel, they  must be willing to take connecting flights that are often hundreds of dollars cheaper, leave in the evenings and stay two nights to navigate around the two-day minimum-stay restrictions.

Also, [corporate travelers] should fully understand the perks of refundable airfare as compared to the cheaper non-refundable offerings. If they are most likely going to take their booked flights and not change them at the last minute, refundable tickets are a waste of money in the long run. Finally, passengers must also be willing to travel on low-cost airlines, even if it doesn’t pad up their personal legacy loyalty points. In other words, customers must treat travel for what it should be — a trade-off between cost and convenience — in the same way they think about their leisure trips.