Hopkins ranked 15th, with average fares of $407.59, in the government's most recent survey of fares at the nation's 100 busiest airports. The main reasons are the presence of a dominant major airline and a lack of low-fare competition
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David Sangree got a dose of the crazy math of airline fares when he booked a ticket to Wisconsin last month.
The president of Hotel & Leisure Advisors in Lakewood was meeting a client who owns a resort in the Wisconsin Dells. The plan was to fly nonstop from Cleveland to Madison, Wis.
For that, Continental Airlines wanted $1,350 roundtrip. So Sangree chose another route, flying Continental to Milwaukee and adding 80 miles to his driving time to the Dells. His roundtrip flight cost: $162.
It sounds topsy-turvy -- almost 10 times as much to fly to Madison. But it's an example of common air fare practices that leave Cleveland Hopkins International Airport with some of the highest average ticket prices in the nation.
Hopkins ranked 15th, with average fares of $407.59, in the government's most recent survey of fares at the nation's 100 busiest airports. The main reasons are the presence of a dominant major airline and a lack of low-fare competition.
So David Sangree's predicament makes perfect business sense. Continental, a hub carrier in Cleveland, has a lock on nonstop flights to Madison out of Northeast Ohio. With Milwaukee, it has competition from two budget carriers.
Steve Frumkin, a partner at Jim Wadsworth Productions, has found a similar situation when booking acts into Nighttown, a jazz club in Cleveland Heights.
"Continental is the only airline with a non-stop" to Los Angeles, Frumkin said. "They want $1,379. This is insane. I can fly to Japan for less."
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View full sizeAirport, business and community leaders cherish hubs even if they have more expensive average ticket prices. Cleveland became one of eight domestic hubs in the merged Continental-United Airlines last October.
"The benefits of the hub are enormous in the regional economy for out-bound travel access, time efficiency, support of in-bound hospitality and tourism, business for conventions, the medical mart and the potential to attract new business," Hopkins Director Ricky Smith said.
United spokesman Mike Trevino said business travel boosts the economic development of the airline's hub cities. "Our nonstop flights, frequent service and international network attract business travelers, who may pay higher fares for the ability to book or change travel at the last minute, choose the most convenient flight and enjoy a superior class of service," he said.
While Hopkins is eager to support its largest tenant, it also is eyeing Southwest Airline's acquisition of AirTran Airways as a possible way to increase Southwest's presence at Hopkins. A recent overview of the airport said Hopkins hopes to "maximize [the] benefit" for Cleveland of the low-cost-carrier marriage in May.
Southwest runs a distant second to Continental in passenger numbers at Hopkins, with 11 percent of the passenger pie to Continental's 65 percent. Some airports with a sizable Southwest presence experience a "Southwest factor" -- lowering of overall fares as the major carriers try not to be undercut.
Even as passengers complain about fares, airlines are figuring ways to get them higher without losing customers. The average roundtrip domestic fare, including taxes, increased just 4.5 percent between 2000 and 2010, from $353 to $369, said the Air Transport Association, the trade group representing major airlines. During the same decade, inflation rose 27 percent.
"The industry cannot continue to lose jobs and money and fly people from point A to point B for less than it costs to get them there and be able to sustain themselves as a business model," Nicholas Calio, president and chief executive of the association, said last month.
Airlines today use computer algorithms to suss out what prices the market will bear. On some routes, fares change multiple times a day.
Distance is a factor in pricing because of jet fuel and labor costs, but secondary to hub status and budget-carrier competition. Routes with lots of business travel can be more expensive because of demand from corporate travelers willing to make last-minute, pricey bookings.
As airlines push the fare envelope, some of the biggest increases are falling on hubs where they dominate and on smaller cities with little competition.
The most-expensive average domestic ticket in the first quarter was $934 from Des Moines, Iowa, to Phoenix, a major hub for US Airways, according to the Department of Transportation.
Continental still has a large market share at its hubs -- 65 percent at Cleveland Hopkins, 71 percent at Newark, N.J., and 85 percent at Houston -- and that provides fare leverage, said Philip Baggaley, an airline analyst at Standard & Poor's who lives in Essex County, N.J.
"Speaking as someone who flies from Newark, it's amazing the fare differences at the three New York airports," he said.
Major airlines traditionally fight hard to control their home base, and like any business, are trying to get the peak price customers are willing to pay, said Bradley Seitz, president of Topaz International, which tracks and audits airfares for corporations.
Houston's Bush Intercontinental Airport had the highest average fare, $476, in the first quarter of 2011, according to the Bureau of Transportation Statistics' most recent ranking.
A year earlier Houston was in seventh place. The other Continental hubs also climbed between 2010 and 2011. Newark now stands in third place, up from sixth, and Cleveland rose to 15th from 21st.
Hubs of Continental merger partner United also have moved higher in the list, except for Denver, which stayed in 77th place.
Hopkins landed near the top in a separate study that used a complicated formula to control for flight distance and passenger counts. The research by the Department of Transportation's Office of Aviation Analysis was devised as an apples-to-apples measurement of airports.
It found that the fare "premium" for flights out of Hopkins -- how much higher Hopkins' fares were relative to industry averages -- was 19.6 percent in the fourth quarter of 2010. Toward the other end of the scale, flights out of Akron-Canton Airport had a "discount" of 17.4 percent.
The Office of Aviation Analysis's fare research has its roots in the early 1970s, before airline deregulation, when the Civil Aeronautics Board set fares for U.S. airlines. The government doesn't regulate ticket prices anymore, but it still keeps an eye on industry competition.
James Brock, an economics professor at Miami University who argued the merger of United and Continental was monopolistic, said fare levels at their hubs and in the Delta-Northwest merger shouldn't come as a surprise.
"This is a pretty basic principal of economics," he said. "If there's less competition, the price will be higher."
The United-Continental combination threw into question Hopkins' place in the combined network since Cleveland suddenly had a monster sister airport 350 miles away in Chicago.
The Greater Cleveland Partnership, the region's chamber of commerce, responded by setting up an air service task force. It's just wrapping up work on a strategic plan for maintaining or expanding the merged United's strength at Hopkins. The partnership's board is scheduled to discuss the strategies at its meeting Tuesday.
"The hub's important to everybody, whether you take your family down to Orlando for the theme parks and the wonderful beaches, or for the business traveler," spokesman Robert Recker said.
Cincinnati also has a chamber-led air service task force, formed because of Delta Air Lines' radical downsizing there. Daily departures at the Cincinnati/Northern Kentucky International Airport have plunged to 191 flights from more than 600 six years ago. Yet Delta retains its grip on the airport with 82 percent of all passengers, and the fares reflect it: Fourth-highest in the nation.
"Our top priority is to increase existing air service and bring in new service," said Barbara Schempf, airport director of public and government affairs.