Brace for Thanksgiving traffic as car-to-plane gap grows

  • With gasoline prices sinking to under $3 per gallon, Americans traveling by car this holiday season will have plenty of company on the road.

    With gasoline prices sinking to under $3 per gallon, Americans traveling by car this holiday season will have plenty of company on the road. thinkstockphotos.com

 
Bloomberg News
Updated 11/19/2014 8:53 AM

With gasoline prices sinking to under $3 per gallon, Americans traveling by car this holiday season will have plenty of company on the road.

Drivers will make up about 89.5 percent of holiday travelers this year, a gain of 0.1 percentage point from 2013, while air passengers will drop by the same amount to 7.5, forecasts prepared by Englewood, Colorado-based IHS Inc. show. A 0.1 point increase may not seem like a lot, but based on last year's estimate that 39.6 million people traveled by car for Thanksgiving, that would roughly equate to at least another 40,000 people piling onto America's highways.

 

The car-over-plane travel choice is made easier by the fact that airfares aren't coming down like gasoline pump prices are. While the plunge in oil has driven down wholesale jet fuel prices 17 percent since August, almost matching the 18 percent drop in retail gasoline, airfares have risen 3.4 percent over that time, data compiled by industry groups show.

"Ground travel is going to gain over air," said Shane Norton, director of economics and country risk at IHS, which helps the motoring club AAA prepare its holiday travel forecasts. AAA is due to release its projection for total travelers this Thanksgiving tomorrow. "The change toward car travel seems like a little, in terms of one-tenth of a percentage point, but you're taking from an air share of less than 10 percent."

At $2.863 a gallon, U.S. pump prices have tumbled to the lowest seasonally in five years, while domestic plane fares are the highest since at least 2008. Airlines are emerging from years of mergers and losses, rising expenses and high fuel costs, so they'll pocket any savings to keep "paying the bills," John Heimlich, chief economist for the trade group Airlines for America, said in a call with reporters Nov. 6.

Fuel prices are dropping as the U.S. produces oil at the fastest pace in more than three decades and growth in demand slows, prompting a sell-off of U.S. benchmark West Texas Intermediate oil futures. WTI has plummeted 29 percent since June 30, and lost 28 cents to $74.33 a barrel at 11:17 a.m. Singapore time.

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Airlines will face the stiffest competition for those traveling 300 to 600 miles (483 to 965 kilometers), said Severin Borenstein, director of the University of California's Energy Institute in Berkeley, California.

Online travel company Priceline Group Inc. estimated Nov. 12 that a Los Angeles resident driving 370 miles to Phoenix would spend $92.40 on fuel versus $261 on airfare. A 3,000-mile haul across-country to New York would cost $690 by car and $494 by plane, the Norwalk, Connecticut-based company said. The driving estimates account for fuel costs only and don't include other expenses such as car maintenance, tolls and parking.

"It's been that sort of middle area of travel where we've really seen planes and cars compete with one another," Borenstein said by telephone Oct. 28.

During the last big plunge in oil in late 2008, airfares fell, with the cost of a domestic coach trip sliding 15 percent, or $71, according to Airlines Reporting Corp., an Arlington, Virginia-based travel services company. The economy was in a recession then, a different environment than the current quickening expansion.

                                                                                                                                                                                                                       
 

"Right now the airlines aren't in the sharing mood," Rick Seaney, chief executive officer of the Dallas-based travel website FareCompare.com, said. "They just went through six years of multi-megamergers and dividing the country up by city with little or no competition, so they'll pocket whatever difference they may get for a while."

Gasoline's drop will save the average U.S. driver about $500 annually, helping boost consumer spending, according to IHS. U.S. auto sales have risen 5.5 percent to 13.7 million in the first 10 months of 2014, on pace to be the strongest in eight years, Woodcliff Lake, New Jersey-based data provider Autodata Corp. said.

The number of people taking trips over the holidays is expected to rise across both modes of transportation, supported by the higher levels of disposable income, Norton said. The number of travelers is forecast as the most since 2007, he said.

In some cases, air travelers will pay much bigger-than- average fare increases. A Thanksgiving flight between Los Angeles and New York costs 35 percent more than the $365 fare last year, Priceline data show. A flight for the same route over the Christmas holiday is about $578, up from $481 in 2013, the company said.

Airlines for America, based in Washington, projected a 1.5 percent increase in air travel over the Thanksgiving holiday, totaling 24.6 million passengers.

"I'm not ready to say that anyone is permanently shying away" from flying, Heimlich said in the call with reporters.

John Sallmen, a 59-year-old insurance salesman who spends almost four hours on the road daily marketing products, could fly, but between cheap gas and the hassle of airports, "Why would I?" he asked, while picking up his daughter from Pittsburgh International Airport Oct. 28. "I got gasoline for $2.75 today at the Wal-Mart in Warren, Ohio."

Sallmen will have his grandchildren home for the holidays, and he's planning a trip, maybe to Virginia Beach almost 500 miles southeast, he said. "We'll probably drive instead of flying," he said. "It's too expensive to fly."

The share of people traveling more than 49 miles by car over the Thanksgiving has been 89 to 90 percent in the past four years, while air passengers accounted for 7 to 8 percent, said Heathrow, Florida-based AAA. Travel by car is up from 83 percent a decade ago and air traffic down from 12, Michael Green, an AAA spokesman in Washington, said by e-mail Nov. 12.

"People are going to be more aggressive about driving," Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by telephone Nov. 6. "They're going to think, 'Why should I take off my shoes in the airport and get there two hours early when I can take a car, for maybe cheaper, and get there in two to four hours?'"

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