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Tuesday, October 7, 2008 |
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Fuel surcharges could push Canadians to alter summer travel patterns |
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Written by Ross Marowits, THE CANADIAN PRESS
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Monday, 12 May 2008 |
Air Canada aircraft sit on the tarmac at Pearson International Airport in Toronto on Tuesday April 1, 2003. THE CANADIAN PRESS/Frank Gunn
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MONTREAL - Canadians may vacation closer to home this summer as soaring gas prices for their cars and new airline fuel surcharges prompt a change in travel patterns, industry experts said Monday.
"It's going to increase the cost of travel and will eat away at discretionary income of Canadian households, which will have an effect on leisure travel," says Randy Williams, head of the Tourism Industry Association of Canada.
Fuel surcharges may not the decisive factor, but the addition of an average of 10 to 15 per cent to cost of North American flights could have an impact, experts say.
Calgary-based WestJet (TSX:WJA) followed the lead of rival Air Canada (TSX:AC.A, TSX:AC.B) Monday by imposing one-way surcharges of $20, $30 and $45 depending on the length of the flight, effective Tuesday.
On Friday, Air Canada began to charge $20, $40 and $60. A round-trip transcontinental trip now costs an additional $120.
The airlines said the speed with which fuel costs have risen forced them to re-introduce domestic fuel surcharges for the first time in four years.
"This is about just trying to get the right number that allows us to recover and to continue to offer low fares," WestJet spokesman Richard Bartrem said.
Canada's No. 2 airline said it is imposing lower surcharges than Air Canada because they are appropriate to its cost model, and not to give it a competitive marketing advantage.
"We are trying to strike that right balance between what makes sense for us and continues to allow us to fill the planes," he said, adding the airline hopes not to destimulate demand.
Analyst David Newman of National Bank Financial said the airlines run the risk of losing customers by raising travel costs.
"Although the surcharge appears substantial, the ultimate impact will be determined in how the increase is absorbed into the market, with potentially weaker loads as the most price-sensitive travellers exit the market," he wrote in a report.
The surcharge could give airlines additional room to lower base fares in the highly competitive Canadian market, he added.
Rising costs related to fuel are just the latest hit being borne by the tourism industry. A slowing U.S. economy and weaker American dollar, along with new passport requirements, have caused U.S. visitors to Canada to decrease by 48 per cent in five years.
Higher prices won't extinguish to desire Canadians hold to see the world, but it may contribute to altering their travel patterns, Williams said.
"They may go shorter distances, take less day trips, go way less on weekends, but certainly they'll continue to travel just maybe less distance."
Some may in fact decide to pay air surcharges and fly long distances rather than haul their RV or boat across country.
Chris White of the Canadian Automobile Association said the travel membership club has received more requests for TripTiks customized driving maps this year as consumers watching the gas price rise have considered alternative vacation plans.
Anecdotal evidence suggests families that considered overseas trips are looking at more modest trips within Canada or renting a cottage, he added.
"It's getting very expensive to fly. People have less discretionary income so you could imagine that there's a strong possibility that will continue to be the trend."
Via Rail plans to hike its fares by two per cent effective June 3 because of rising fuel costs.
But spokesman Malcolm Andrews said it's difficult to say whether the rail service will benefit because it doesn't charge fuel surcharges.
"People are price sensitive and at a certain point people are going to reach their limit of tolerance and say: 'I'm going to look for an alternative or I'm going to change my habits."'
Michael Pepper, CEO of the Travel Industry Council of Ontario, said he believes the number of money spent on travelling will slow this year after robust annual growth. That includes corporations, which will look at alternatives to communicate in the face of rising travel costs.
"It's bound to have an effect on where people draw the line on how much money do they have of disposable income to spend on a vacation or travel."
The council, which regulates 3,000 travel retailers and wholesalers registered in Ontario, has lobbied the federal government to force airlines to include the total cost of air travel in their advertised prices.
Pepper said the airlines are misleading the public by not fully including up front extra charges, even though they have noted that international fares include additional costs for fuel and other charges.
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Last Updated ( Sunday, 07 September 2008 )
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