Are Record-Low Fares to Europe Coming to an End?

In my last post I discussed the PPM filters on FareCompare, and how they demonstrated just how good the fares from the US to Germany and Moscow are right now, especially compared to other European gateways.  The bigger news isn’t simply how low they are, but when they’re so low.

The fares I discussed are especially competitive given the time of year for which they’re valid, specifically May departures.  Keep in mind that most airlines generally set prices for up to 3 seasons; low, shoulder and high.  Some airlines only use 2 of those seasons (low and high), and some even add in a fourth “peak” or “super peak” or “super-duper peak” season.

The seasonality corresponds with demands at specific times of year.  For Europe, most airlines traditionally set low season as January 1 -March 31, November 1 – December 15-ish, and December 25-31, as the weather across Europe is colder at these times, as travel demand is understandably low.  Shoulder season is set for spring and fall, usually April 1 – May 31 and September 1 – October 31 when temperatures are milder and demand is higher accordingly.   High season generally runs through the summer months, or June 1 – August 31, when the weather is best, and when kids are out of school, and when demand is highest.

This varies by airline, and from year to year.  About 10 years ago, it was fairly standard for most airlines to raise their fares to high season levels starting around June 15.  This slowly began being pushed back to June 1 as airlines realized that the demand in early June was still very strong, especially among regular travelers who knew to book their flights for early June when they could usually save about 50% off flights departing at the end of the month.  Up until last year, many airlines had even pushed peak season up to begin around Memorial Day, figuring that’s really when the de facto start of the summer travel season begins (as opposed to 1 week prior to the summer solstice, which had seemingly been their previous benchmark).

The current economic outlook has caused a seismic shift in seasonality this year.  Airlines tend to generally publish aggressive fare sales to Europe in Q1.  Lowest fares are typically offered for last-minute travel from January-March, which as I previously mentioned is already low season.  There may also be some sort of discount offered for shoulder (spring) and high (summer) season travel as well.

From the airline’s revenue standpoint, Q4 is usually weak for international travel, especially to Europe.  There is consistent demand in late December around the holidays, although this is comparatively higher to other regions such as Asia, Latin America and the South Pacific at that time of year versus other months.  Revenue to Europe is expected to be soft in Q4.  It’s expected to be almost non-existent in Q1, as the entire quarter falls within what’s generally defined as low season, and anything earned is considered to be gravy.

Since the recession unofficially began last fall, Q4 was especially weak, with sales throughout most sectors dropping at least 20-25% from the previous year.  And in Q1 there was hardly any gravy at all.  Furthermore, outlook for Q2 & Q3, typically the strongest time of year for trans-Atlantic travel, was miserable.

In less seasonal industries, companies would reduce prices until further notice to compensate.  However, in airline revenue management, summer revenue is so critical that airlines simply can’t afford to offer huge discounts on them.  They may drop well below forecasted or year-over-year levels, but you’ll never see fares to Europe for June-August travel like what you’ll see at other times of the year.  Airlines pay their bills for the entire year with those revenues, and dropping them substantially means redoing all their budgets for next year.

Instead airlines reacted by dropping fares for spring travel, offering deals that we often don’t see for winter travel.  For example, when I started in the industry working for Council Travel in 1997, any fare to Europe for under $500 out-the-door including taxes from San Francisco was considered a great deal, as was anything under $300 total from the East Coast.  Even the lowest supposed “$99 fares” from New York to London were generally for each way (based on round-trip purchase, so really $198 + tax) before taxes.  There would typically be at least 2-3 sales/year that would get within that range, almost always for travel in January-March.

In more recent years, airlines have led in with more deceptively low fares, that were offset based on not only the bogus “each way based on round-trip purchase” requirement, but also by record-high fuel surcharges.  Those fuel surcharges alone were as much as $300-$400 roundtrip to Europe last year.

When oil costs were sky-high, airlines simply couldn’t afford to get that aggressive with fares, although they still did manage to come up with some fares in the $450-$500 total range from San Francisco in early 2008.  Most of those same routes were $600-$800 for spring travel.

This year, fares have actually come down for spring travel, when they’re normally supposed to go up.  Unfortunately many people assume this means that airlines are desperate and that fares will continue to go down.  I’ll guarantee that won’t happen anytime soon, and if it does, it certainly won’t be for peak season summer travel.  They might be lower than they were last summer, but they certainly won’t be anywhere close to what we’ve seen for April & May this year.

For example, fares from San Francisco to Frankfurt (and just about anywhere else in Germany) start at just $395 for May departures.  June-August fares start at $535, which is still an incredible deal for peak season travel from the West Coast.  I can comfortably say that $1000 was the going rate for summer fares to Europe for the past 10 years, if not closer to $1200-$1300.  However, keep in mind that those summer fares are still 25% higher than what they are for May departures.

More importantly, checking the same route for fall/winter travel shows fares of $664 for November departures – typically one of the cheapest months of the year to fly to Europe.  That price represents what the airlines want to be charging during low season, which illustrates just how low they’ve already dropped their prices for spring & summer.

San Francisco to Dublin fares can still be found for about $376 for May travel, but prices in June-August go up to at least $656.  That’s a 74% increase, which (yet once again) shows how great the Germany fares are.  Regardless, $656 to Dublin from the West coast is still a great deal.  Even next winter, fares on that route don’t drop below $568.

Eventually the airlines will have no choice but to stop dropping European fares for their bread-and-butter summer season.  They may not get much higher, and by mid-summer (usually around mid/late-July) they may lower fares for August travel.  More likely, they’ll start using the fall and winter seasons to entice real price-conscious budget travelers with low fares, and then keep their fares higher for the remainder of the summer.

There are no rules to this game.  The short answer to “When should I buy my tickets?” is simply, whenever you’ve found a price and set of travel dates that works for you.  Realistically, if you can afford $395 to fly to Germany, then you can afford $535 as well.  And if you can afford $535 to go this summer, then you’d be crazy not to, and even crazier to not book your tickets soon.

Happy May Day, Comrades! Let’s All Go To Moscow!

Today is May Day, or International Workers Day as it’s known by communist sympathizers who disapprove of being referred to as communists.  San Francisco’s Rainbow Grocery is closed today in honor of the occasion, and The Flight Guy will mark the day by blogging about Moscow, once the home of May Day’s wildest and craziest parties (although none quite as wild as Queen’s Day).

In yesterday’s blog I mentioned that fares to Germany are so cheap right now, that they justified flying in to a major German airport as an alternative to other nearby European cities such as Amsterdam.  The same could easily be said of other popular cities, especially in Eastern Europe, such as Prague, Krakow, etc.

Not only are these cities easily accessible from major German air hubs such as Frankfurt and Munich, but most airlines have common-rated fares to smaller airports in eastern Germany such as Leipzig and Nuremberg.  Granted those smaller airports generally involve taking an extra connecting flight, so your best bets if you want to combine a trip to Germany with to other countries in Central/Eastern Europe would be to fly to a major gateway such as Berlin or Munich, and then invest in a Rail Pass that covers Germany and the other countries that you want to visit.  You can also play around with Rail Europe’s Pass Finder to explore all of your options.

Fares to Germany are so low right now, that they account for 99 out of the 100 best deals from North America to Europe right now in terms of Price Per Mile (PPM).  I mentioned in yesterday’s blog that I’d be sharing some travel site tips with you, and for this purpose I can’t say enough about FareCompare’s Flyer Talk Fares.

As someone who used various GDS (Global Distribution Systems) professionally for years, as a fare geek I’ve found it frustrating being without them.  Luckily FareCompare provides some decent tools for both professional and amateur fare geeks to analyze what’s in the market.

Of those top 100 PPM fares to Europe, the only one that isn’t to Germany is from New York to Moscow on Delta, which comes out to the bargain price of just $339 including tax for departures in May.  Technically it’s ranked #98, although fares #78-#100 are all statistically about the same, coming it at just 3.6-3.62 cents/mile.

It’s a significant fare not only because it’s the only fare in the top 100 that isn’t to Germany, but it’s also the only one on that list that isn’t from California (69) or Texas (30).

Recent domestic fare wars have lowered the bar for what airlines need to charge from the West Coast to Europe, but I’ll focus on that more next week.  For the time being, why is Moscow specifically the best deal in terms of PPM off the East Coast?  The short answer is competition.

Up until the recent economic meltdown, Russia’s financial growth was booming, fueled largely by its vast supply of natural resources (notably oil and gas) and a robust commodities sector.  And as Russian business boomed, demand for air travel to/from the country increased along with it.

For many years, Moscow was only reached by direct flights from the US on Aeroflot, which currently offers nonstop flights between Sheremetyevo International Airport (SVO) and New York (JFK), Washington DC (Dulles) and Los Angeles.  Aeroflot also used to operate flights to Anchorage, Chicago, Miami, San Francisco and Seattle, all of which were discontinued between 2001-2003.  The airline even flew trans-Pacific routes from San Francisco-Vladivostok and Anchorage-Khabarovsk, making it the only airline in the world to operate completely around-the-world service.

As for Moscow, most Americans traveled there via another European gateway such as London or Frankfurt on a European airline such as British Airways or Lufthansa.  That begin to change a couple of years ago when Delta Airlines continued its European expansion with nonstop flights from JFK to Sheremetyevo, which were recently complimented with additional nonstop flights from Atlanta to Sheremetyevo.

American Airlines crashed the party last summer when it began nonstop service from Chicago (O’Hare) to Moscow’s newer and more comfortable (ie: less Soviet) Domodedovo International Airport (DME).  And earlier this spring, United Airlines, which had previously been funneling passengers to Moscow via Frankfurt using codeshares with its partner Lufthansa, also began nonstop service to DME from Washington Dulles.  US Airways has also secured traffic rights to begin flying to Moscow from its hub in Philadelphia.  That leaves Continental as the only major US airline out of the mix, which is somewhat ironic considering that until recently they offered flights to the most international destinations from the US (they were recently surpassed by Delta’s aggressive expansion, and are now a distant second thanks to the Delta-Northwest merger).

Like everything else in the free market, airfares are dictated by the laws of supply and demand.  Judging by the low fares to Moscow from across the country, not just New York, there appears to be a huge glut in supply as well as little demand.

When United entered the market earlier this year, they were offering fares from about $500-$600 from the East Coast, and about $600-$700 from the West Coast to Moscow, including taxes.  Those were on par with what has been offered in low season (January-March) over the past few years, including 2007-2008 when oil prices (and subsequent airline fuel surcharges) were at record highs.  Thus they were simply trying to tap in to existing demand, and weren’t doing anything to try to increase demand.  That’s a questionable strategy when launching a new route in a healthy economy, and it’s downright stupid when trying to do so in a recession.  It’s even more suspect to a market that has been so adversely affected as Russia.

As a result, fares began plummeting on all airlines, not just United.  It’s not surprising to see Delta being especially aggressive in this market, considering how highly they value market-share in their ambitious international expansion.

So now there are deals to Moscow to be had from just about anywhere in the US, often costing much less than fares to what have traditionally been cheaper Western European gateways.  For example, fares from San Francisco to Moscow are now as low as just $537 with tax, whereas fares from SF to Amsterdam start at $684.  Singapore Airlines recently began nonstop service from Houston to Moscow, partially as a fueling stop en route to Singapore, but also as a way to capitalize on connecting two of the world’s biggest energy markets.  As a result, fares from Houston-Moscow can be found for under $500, whereas fares to London, Paris and Amsterdam are all over $500.

Happy Queen’s Day! The Flight Guy’s Inaugural Blog Goes to Amsterdam

Greetings from The Flight Guy.  Over the next few days I’ll introduce myself in more detail and will explain more about how this blog came to be.  But in short, my name is Matt Radack and I’ve worked in travel industry for over 11 years, specializing primarily in online international travel.

I started this blog since I’ve got some time on my hands, and because my friends and family are always asking me about flight deals.  There are already lots of great sites focused on travel, and plenty of not-so-great sites as well.  One of the things I want to do here is to help guide you through those good and the bad sites, as well integrating the latest online mapping and Web 2.0 technology to help you find great flight deals yourself.

Since today is Queen’s Day, or Koninginnedag as it’s known in Dutch, I’m going to talk about flights to Amsterdam.  I spent two summers living in Amsterdam, in 1996 and 1997.  During my first summer I would constantly see photos from a giant street party which I would learn was Queen’s Day, held annually on April 30 in honor of form Queen Juliana’s birthday.  I’ve been nostalgic to visit there lately due to the holiday, the amazing fares to Europe that have been on sale this spring, as well as this fantastic Amstel Light commerical (which may have well been sponsored by the Amsterdam tourism authorities) and features some lively Koniniginnedag footage:

Editor’s note: This ad is pure demographic genius.  Aside from the old guy at the very beginning, not a single person in this commercial is over 30.  It’s like the Logan’s Run of marketing.  But I digress…

Although Queen’s Day is a national holiday celebrated throughout the city, the biggest party is (not surprisingly) in Amsterdam, where festivities actually begin the night before on April 29.  When I went back to Amsterdam for the summer in 1997, I made it a point to arrive on April 28.

Queen’s Day did not disappoint.  There are approximately 16 million people in the Netherlands, about 800,000 of whom live in Amsterdam.  However, on Queen’s Day there are an estimated 3-4 million people who descend on the Dutch capital, almost all of whom are decked in classic Dutch orange.  Simply walking the streets becomes an exercise in advanced logistics, as the crowds are so great that you basically jump in to a sea of humanity that’s heading in one direction.  If you need to head in the other direction, well then you’ll need to slide in to one of the Centrum’s many alleyways, continue on to the next street, and just hope that it’s going the right way.  Even Amsterdam’s famous canals become packed with boats, sometimes to the point that it’s almost possible to walk across them frome one side to another.

Koniniginnedag is also known for its free market, when everyone in the country holds their annual garage sale.  That’s especially practical in a country where people live in tiny houses, most of which don’t have garages and have very limited storage space in the first place.  For the wide-eyed foreigner like me, one’s first Queen’s Day experience is expected to be about the wild party.  But more often than not, when you speak with a local about Queen’s Day they’re likely to ask you “What did you buy?”  I was to hung over to shop that day, so I didn’t buy anything.  I was also still looking for an apartment and didn’t have anywhere to store my own stuff, let alone someone else’s junk.  However, unbeknownst to me, purchasing someone else’s useless crap on Koniniginnedag is considered an annual Dutch rite of passage, and to admit not doing so is to subject one’s self to ridicule.  Plus as with the case with most garage sales in the US, by the end of the day everything is pretty much up for grabs for free, including furniture.  So if you should happen to move over there prior to Queen’s Day and have a new apartment ready, then your chances of getting a free couch on April 30 are pretty high (as you may very well be yourself).

Even if you’ve missed Queen’s Day this year (which you have), springtime is still one of the best times to visit Amsterdam.  It’s still free of the peak summer crowds and prices, and the weather isn’t bad (although it’s never very good in Holland).  Expect temperatures in the low-mid 60′s in May, and mid-upper 60′s in June.  The two biggest perks are the long days (up to 18 hours of daylight around the summer solstice…when it’s not raining), and the country’s legendary flora.  One of the most common questions asked by tourists in Amsterdam is “Where are the tulips?”  The correct question is actually “When are the tulips?”  They only bloom from early April until mid-May, so if you hurry then you can still make it over to see them this year.  For the best tulip-viewing in the country, be sure visit the Keukenhof flower garden about 50 km southwest of Amsterdam near Leiden, which is only open through May 21.

Now for flight info.

Because I’ve spent enough time here talking about the destination itself, the first installment of The Flight Guy is going to go light on flight info.  For all you airfare junkies out there, stay tuned for tomorrow’s special May Day edition of TFG for timely tips on deals to Moscow.

As for Amsterdam, let’s keep this simple.  Although Amsterdam is a major air hub served by dozens of flights from the US, the fare sales to nearby Germany right now are just too good to pass up.  If you’ve got some time on your hands then you may save substantially by flying in to a major German gateway instead.

Although Frankfurt is Germany’s major air hub, it’s at least 3.5 hours away by train, and flights between the two cities aren’t cheap.  A closer option is Dusseldorf, which is only 2 hours away from Amsterdam.  Standard 2nd class train tickets are about $90-$100 each way depending on the exchange rate, but it’s worth asking in person if there are any last-minute discounts, which are often available for groups of 2 or more, especially on weekends.

Better yet, invest in some type of railpass.  Despite the surge in low-cost carriers (LCC’s) in Europe, railpasses make getting around by train both affordable and generally far more comfortable than train travel.  Plus, for short distances such as Germany-Netherlands, it’s often a lot quicker since you don’t have to deal with security, flight delays, etc.  Rail stations are generally right in the middle of any European city (as opposed to in the outskirts as airports are), so it’s a shorter trip to/from your hotel on both ends.  Best of all, most major German airports, including Frankfurt, Dusseldorf and Munich, feature rail stations in the airports themselves, so you never even need to head downtown to make your connection in many cases.

Two recommended railpasses for this type of trip would be the Germany-Benelux pass, which starts at at just $305 for 5 days of train travel within Germany and the Benelux countries (Belgium, the Netherlands and Luxembourg).  If you’re just flying in and out of Dusseldorf then it’s arguably a bit cheaper to buy point-to-point train tickets for about $200 round-trip, but if you are heading to Frankfurt where train tickets are closer to $190-$200 each way then you’re better off with the railpass.  Plus, if you’re 25 or under the Youth pass starts at just $248, as does the Saver pass, which is valid for groups of 2 or more (of any age).  The other advantage of the railpass is that you’ll have the flexibility to explore more of both Germany and the Benelux countries with 5 full days of train travel.

If you’ve got more time then consider a Eurail Select Pass, which start in price at just $435 for 5 days of train travel in Germany and Benelux, plus one more from the following: Austria, Czech Republic, Denmark, Finland, France, Ireland, Sweden or Switzerland.  Youth passes start at just $284, and Saver passes for groups of 2 more people traveling together start at just $370.  You can also purchase add-ons allowing up to 15 total travel days, or up to 5 countries.

Is it worth it?  Let’s do the math:

Departing out San Francisco there are a variety of fares in the market for about $695 including taxes for May departures.  In contrast, fares to Frankfurt, Dusseldorf, Munich and Berlin are available for as little as $395, and I’m seeing the same $250-$300 difference from most other US gateways as well.  If your time is tight, well then just fly in and out of Amsterdam – I tell people all the time that the single most overlooked cost in travel is opportunity cost.

But if you’ve got the time (say you just graduated college, or are between jobs like TFG), then you’ll make better use of your money by flying to Germany and investing in the railpass instead.  Think of it this way – for the same cost of a roundtrip flight to Amsterdam alone, you could visit Amsterdam, Brussels, Munich and Berlin, not mention all of the colorful towns along Germany’s Romantic Road, historical cities such as Bruges, or less-touristy (yet equally interesting) Dutch cities such as Maastricht.