Transatlantic Air Travel Is About To Change In A Big Way

For those of us who aren’t jetting around on expense accounts, who might glance at the business-class seats with a mixture of jealousy and scorn as we shuffle toward the back rows, price and convenience are what matter most.

But airfareology is a tricky science. How are prices set? How do I find the best prices? Who is fighting on behalf of the consumer, and who is trying to swindle us? Are there even clear answers to these questions?

Every so often, clues to the answers arise when airlines change their rules, or the government tweaks its regulations and approvals. Both happened recently, and the changes could make your international travel cheaper, and domestic travel more expensive, depending on your shrewdness.

The most exciting change, especially for those looking to travel to Europe, is the preliminary approval granted to Norwegian Air Shuttle by the U.S. Transportation Department to expand its operations between the United States and Europe by using an Irish subsidiary.

Norwegian is a low-cost, no-frills airline that already flies from New York to five cities in Europe and two in the Caribbean that are on French-administered islands. The carrier wants to run 37 nonstops between the continents by summer, including recently announced flights between Paris and New York, Los Angeles and Fort Lauderdale, Fla., that would start at $175 one-way.

These plans are far more ambitious than similar attempts to transform transatlantic travel by “mid-cost” airlines such as Icelandair and Aer Lingus. Norwegian will take advantage of Ireland’s low taxes and limited labor protections, which could allow the company to use cheaper crews from places such as Thailand. The company also has subsidiaries in Denmark, Sweden, Finland, the United Kingdom and Singapore.

Transatlantic routes are dominated by the three American “legacy” airlines – United, Delta and American – and the partners with which they have essentially merged on the other side of the pond.

The airlines, as well as unions and lobbies associated with them, have fought tooth and nail against Norwegian and other competitors. They accuse Norwegian, for instance, of “labor dumping” and claim that it is a violation of “open skies agreements” that the United States has signed with more than 100 countries and that stipulate certain degrees of labor protections.

Similarly, they accuse wealthy Persian Gulf governments of overly subsidizing their prolific, state-owned airlines, calling that practice “financial doping.” Airlines such as Emirates and Etihad have expanded service to the United States, providing greater competition on routes to Asia and Africa.

For whatever it’s worth, executives at both Norwegian and Emirates, for instance, deny that they engage in either practice, and they say their operations employ many Americans and support the economies of the cities they serve. Both airlines also have invested heavily in American planes.

“The four factors that go into ticket prices are supply, demand, fuel costs and competition,” said Rick Seaney, chief executive at Farecompare.com. “From a consumer perspective, competition is now the only thing keeping fares artificially high.”

With a spate of mergers in the United States, the field is down to three legacy carriers from seven. As a result, both domestic and transatlantic competition have drastically reduced. By way of its aggressive low-cost model, Norwegian is pushing the boundaries as to what will be allowed in pursuance of the lowest possible airfares.

The second change happened so subtly that Seaney, a self-professed airfareologist, can’t say exactly when it transpired. The new “rule,” implemented in what seems like a coordinated move by the three legacy carriers, can result in “multi-city” tickets being advertised at rates two or more times what they used to be.

Anytime a trip is booked that involves a domestic stopover of more than four hours, it becomes a multi-city booking. The old rules simply allowed you to combine two available fares on each leg, but the new rules implement a new fare structure for those combinations that result in a much higher fare when booked on the same ticket. It turns out that the only way to avoid the new fares is to book each segment separately.

Last week, Sen. Robert Menendez, D-N.J., called the legacy airlines’ rule change “unfair and deceptive” and requested that the Transportation Department to investigate. As Christopher Elliott noted in a recent Washington Post column, this would be the second investigation into collusion among legacy carriers in as many years. Last year’s, which looks at the possible limiting of available seats and resulting price inflation, remains active.

“Now that there are fewer airlines, it is easier to collude,” Seaney said. “Those three follow each other like lemmings – either off a cliff, or to wherever they’re feeding.”