>From USATODAY Jan 10, 2005: I have marked the salient points from Goa's perspective with ==> -------------------- <Posted 1/10/2005 11:19 AM
Minneapolis fares some of the highest in the country MINNEAPOLIS (AP) - Minnesota travelers can get to more than 160 cities - from Brainerd to Beijing - from the Northwest Airlines hub here. But two new studies show they pay extra for the privilege. While low-fare competition has driven down airfares across most of the United States, people flying out of Minneapolis-St. Paul International Airport pay some of the highest fares in the nation. In the second quarter of 2004 alone, the cost of traveling to and from the airport was $118 million higher than the average fares for comparable travel at other U.S. airports, according to research by Severin Borenstein, an airline industry expert and economist at the Haas School of Business at the University of California, Berkeley. ==>Meanwhile, a BACK Aviation Solutions study performed for the Star Tribune newspaper found that the Twin Cities airport has a larger share of high-price domestic routes than 46 of the top 50 domestic cities, among routes with at least 100 passengers daily each way. Northwest strongly disputed both analyses, saying average fares are misleading if they don't adjust for Minnesota's higher share of business travelers, who pay more for last-minute travel. Yields, which are one measure of how much airlines charge, have fallen faster at the Twin Cities airport than the average decline at other domestic airports, said Northwest vice president for communications Mary Linder in a letter to the Star Tribune. And Northwest, responding to cuts by Delta Air Lines, cut some of its most expensive fares last week in markets where the two airlines compete. In the second quarter of 2004, travelers flying in and out of the Twin Cities paid an average round-trip fare of $380. That's $60 more than the national average for a comparable trip. If they flew on Northwest, they paid $412, which was $92 more than the average at other airports, according to Borenstein's analysis of ticket data. ==> The only cities with higher average fares were Charlotte, N.C.; Cincinnati; Memphis; and Washington, D.C.'s Reagan National. At Northwest's Detroit hub - which has more flights from low-fare carriers - the gap between local and national average fares was 12%, half of the gap in the Twin Cities, according to Borenstein's analysis. Borenstein said passengers on trips that began from or ended at the Twin Cities airport paid $456 million more than the national average in 2003, the last full year for which data are available. The running total since 1995 would be $4.4 billion, according to Borenstein. Fares at the Twin Cities airport were 21% higher than the national average in the first half of 2004, and Northwest's fares were 31% higher. The average fare for the 17 other carriers at the airport, including low-fare operators such as Sun Country Airlines, AirTran Airways and ATA Airlines, was 7% higher than the national average. But those 17 airlines don't carry enough passengers to make a noticeable cut to the average cost of traveling from Minneapolis. ==>"Prices at some airports remain stubbornly high," Borenstein wrote in his study, a working paper of the Competition Policy Center at UC Berkeley. "These airports are notable for their lack of large-scale entry by low-cost carriers." ==>The BACK Aviation Solutions study found that the only places with larger shares of high-cost tickets than the Twin Cities were Charlotte, which is dominated by US Airways, and three cities in Hawaii. And adjusting for distance makes the Twin Cities fares far higher than those from Hawaii, BACK said. Northwest disputed the methodology and conclusions reached by BACK and Borenstein. Linder cited other studies, including one partially paid for by Northwest, that concluded that travelers out of MSP enjoy a 6% "hub discount." ==>And Linder pointed to a preliminary, unpublished 2002 paper by economists Darin Lee and Maria Jose Luengo Prado that said most of the price difference between the Twin Cities and national averages disappears once the higher number of business travelers is accounted for. Linder also disputed the notion that Northwest faces limited competition in the Twin Cities. She said nearly 60% of Minneapolis-St. Paul travelers have a nonstop alternative to Northwest, and 98% of domestic travelers out of the Twin Cities could fly on other airlines. Some elected officials and industry analysts say being a hub city brings benefits that are worth the cost. "Anybody who says they don't want to be a hub city is just lying," said Leonard Griggs, who recently retired as director of Lambert-St. Louis International Airport, which recently lost most of its American Airlines hub. "While we do pay a hub premium, we can also go anywhere in the world we want. One of the reasons this is an attractive place to locate businesses is our airport," said Vicki Tigwell, chairwoman of the Metropolitan Airports Commission, which runs the Twin Cities airport. ---------------------------------------------------------------------------- ---- Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.> ------------------ Ribandar