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 Airlines serving the U.S. oil capital have resorted to steep
discounts to lure newly budget-conscious energy executives back into
the air, according to an analysis of ticket prices provided
exclusively to Reuters.
Crude's 70-percent drop in the past 19 months has made the Houston
travel market a rare point of downward pressure on airline revenues.
Its value, including flights, conventions and related services, was
estimated at $2.8 billion in 2014 in a report for the Texas
governor's office.
The ticket data offers more detail than carriers have disclosed
about the challenges they face at Houston's George Bush
Intercontinental Airport, the ninth busiest globally by take-offs
and landings, according to Airports Council International's 2014
ranking.
On average, round-trip business and first class tickets to London
sold in September 2015 were 14 percent cheaper than a year earlier,
at about $4,600, according to the latest figures from fare
clearinghouse Airlines Reporting Corporation.
Tickets to Calgary, a gateway to northwestern Canada's vast oil
fields, plummeted 59 percent to $1,020.
 And prices for tickets to top drilling gateways Lagos, Dubai and
Scotland's Aberdeen fell 22 percent, 23 percent and 31 percent,
respectively. (Graphic: http://tmsnrt.rs/1VsEfUg)
"It's a combination of fewer people traveling and not as many people
flying business class," said Gary Pearce, chief commercial officer
for travel management company ATPI's energy and shipping unit.
"Companies are re-negotiating terms with anybody that provides a
service to them," he added, such as asking airlines to sell lower
fares or waive clauses on minimum bookings.
Exxon Mobil Corp, ConocoPhillips and BP PLC, which has its U.S.
headquarters in Houston, declined to comment for this story.
BIGGEST LOSER
The oil slide has largely helped U.S. airlines, reducing one of
their biggest expenses and adding hundreds of millions of dollars to
their bottom lines.
However, they have forfeited a large chunk of the gain because of
fuel hedges they bought as protection against crude rising.
Houston's example is another reminder that cheap oil cuts more than
one way.
United Continental Holdings Inc said last week that it doubled its
adjusted fourth-quarter profit to $934 million from a year ago. But
slack business in Houston will reduce its passenger revenue as a
portion of flight capacity by 1 percent in the first quarter, the
airline said.
Chicago-based United is the most affected because it schedules more
than 80 percent of Bush Intercontinental's flights. About 10 percent
of United's flight capacity originated from Houston according to
this week's schedules, aviation data and analytics company OAG said.
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Other airlines adjusting to the oil slump include Delta Air Lines
Inc, which recently stopped flights from its Minneapolis hub to
Dickinson, North Dakota, near the Bakken shale oil formation.
Alaska Air Group Inc reported on an investor call last week that its
energy-related sales were "fairly stable" because roughly the same
number of workers needed to fly to oil-rich Prudhoe Bay to operate
drills and pipelines there, despite lower production.
Airlines Reporting Corporation, owned by a group of North American
airlines, declined to provide data on Prudhoe Bay flights and other
routes that were dominated by a single carrier and therefore market
sensitive.
LEISURE FARES DOWN
Cheap oil has not only lowered corporate travel spending. Greater
Houston's 6.5 million residents are cutting back on leisure trips,
too.
The average low leisure fare is down 25 percent from Houston while
only down 20 percent overall in the United States, according to a
mid-January analysis of the top domestic routes by Harrell
Associates, shared with Reuters.
Fares have fallen nationwide, not just in Houston, because lower
fuel costs have let the largest airlines chop their fares in stiff
competition with budget rivals like Spirit Airlines Inc
Still, the lowest refundable last-minute fares from Houston are down
11 percent, but up 5 percent nationwide, Harrell Associates data
showed.
United said last week it is scrapping plans to grow its Houston
operation by 2 percent in 2016 and keeping capacity steady instead.
The airline declined additional comment for this story but noted
that in January 2015 it shrunk its Houston-Calgary operation to
three flights per day from four.
The airline's loss could be a gain for budget rival Southwest
Airlines Co, which in October started its first international
flights to Latin America from nearby Houston Hobby Airport.
(Reporting By Jeffrey Dastin in New York; Editing by Joseph White
and Tomasz Janowski)
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