Airline ticket sales through travel agencies dropped 25% in January versus the previous January, an astounding drop considering December saw only a 7% fall off versus the prior year. Travel agency sales, which represent roughly half of airline ticket sales in total, are a leading indicator since most of those sales are for flights in future months. That is bad, as you might have surmised by now.
Yes, airlines have taken capacity out of the market versus last year, and there’s been a bit of shift away from travel agencies toward direct sales over the past year, but not nearly enough to make up for that difference. Airlines basically have two options: take more capacity out of the market or lower fares. The airlines have already taken out a bunch of capacity, and there’ll be more tweaking. They are extremely reluctant to lower fares beyond the very low prices we’re seeing now (I can fly round trip from NYC to LA for less than $250 with less than a week advance purchase). I expect we’ll see these lower fares available without advance purchase restrictions, as businesses re-evaluate every travel dollar.
Most airlines have said they can be profitable in 2009, but I think everyone is surprised by the severity of the sales drop in January. On a plus note, it’s incredibly cheap to fly just about anywhere right now.