NDTA’s Passenger Travel Services Committee (PTSC) provides the opportunity for open communication between government and travel industry decision makers to improve programs, trends, policies, and other issues that impact the government traveler and the travel industry. Primary objectives are to facilitate dialogue, bridge any information gaps, and promote education of the travel industry.
Surviving the Economic Roller Coaster PASSENGER TRAVEL OUTLOOK By Dr. G.R. “Rocky” Mobaraki, MBA, PhD Passenger Travel Services Committee (PTSC) Chair Director, Government Sales, The Hertz Corporation
Oil and food prices are up, stock market and home prices are down, and the cost of travel continues to rise! We all wonder how long this economic Roller Coaster ride will last.
A
irlines are scrambling to adjust to jet fuel prices that have jumped 86% by grounding fuel inefficient planes and instituting additional fees. But it may be too little too late to show any profitability for 2008. In the past five months, 7 airlines have either ceased operations or filed for bankruptcy, and a major merger between two legacy carriers (Northwest and Delta) is awaiting approval by the Department of Justice. The meteoric rise in fuel costs is driving this wild ride. Not that long ago, during the 1990s, a barrel of oil cost around $20; as of this writing, the cost is way up at $143 plus. Airlines pay about $30 more than market price for refined aviation fuel, and most companies hedge fuel costs by buying it on the futures market at cheaper levels and locking prices in for months at a time. Unfortunately, due to rapid cost increase and the expiration of futures contracts, airlines are eventually exposed to higher fuel costs over time Increased airfares partially offset fuel costs, and fare increases have been implemented at least a dozen times since the beginning of the year. Fuel surcharges, now authorized by the GSA city pair contract as add-ons to the awarded government fare, often are a part of the total fare charged, both for domestic US and international itineraries. All passenger travel providers are affected. To survive, some have reacted by charging for items that previously were complimentary. In other words, my friends—the free lunch is over.
