GSA contracts call for increased fares

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Government employees will be paying high fares and taking more connecting flights for their official travels in fiscal year 2009, according to $2.4 billion worth of city-pair contracts recently awarded to a dozen airlines by the General Services Administration.

The average fare for a one-way ticket will increase by about 13%, to $308.59, thanks mostly to higher fuel costs, the GSA said.

Overall, the contracts cover 5,502 domestic and international airport pairs, up 10% over 5,002 in the current fiscal year. The $2.4 billion estimated value of the new contracts marks a 20% increase over the estimated $2 billion value of the current year's contracts.

The deals affect more than U.S. taxpayers: The GSA contracts often serve as a benchmark by which top commercial and corporate customers measure their own deals.

"Certainly, the government is going to get the best deal," said David Beckerman, vice president of OAGBack Analytical Solutions, based in Washington.

"Companies will get a bit above that," Beckerman said.

The corporate deals will likely lie somewhere between the average GSA increase and that paid by commercial travelers, about 34%, according to GSA research.

The airlines are willing to give the discounts for the guaranteed capacity.

Tim Burke, GSA director of travel and transportation services, said, "We're a good high-volume customer."

Even in a stormy economic climate, Burke said, the U.S. government needs to work and its employees need to travel.

The airlines "want our business," he said. "We're a pretty steady customer."

While the government's average fare will increase by about 13%, there will be decreases, too. For example, an advance-purchase, one-way ticket for the shuttle between Washington Reagan National and New York LaGuardia will cost $57 in fiscal 2009, compared with $66 this fiscal year. Last-minute tickets that now cost $110 will cost $105.

The number of domestic routes is contracted to grow by 11%, to 4,303, thanks mostly, Burke said, to the airlines' more concentrated use of their hub operations.

The number of international routes is slated to grow by about 6%, to about 1,199, a reflection, the GSA said, of U.S. government officials' greater need to travel to more remote areas in places like Africa and the Middle East.

As for individual carriers, Delta emerged as the big winner in terms of the number of markets. The carrier boosted its share of the routes by 66%, to 1,553, while increasing its total contract tally by nearly three-quarters, to $641 million. 

Delta spokesman Carlos Santos said the airline garnered the second-highest tally for international service, including 71 markets to Seoul, South Korea. He added that the carrier was able to secure for the first time in two years the important East Coast shuttle routes linking Boston, New York and Washington.

While United retained the overall contract award lead with about $663 million, that figure represented a mere $2 million increase, and the carrier dropped its route count by 207, to 1,136.

United saw its share of the overall contract award drop from 33% this fiscal year to about 27% in fiscal 2009, according to a Travel Weekly analysis of the GSA contract data. Delta's share jumped from 18% to 26%.

"There was some shifting of which carriers wanted to participate," Burke said. "Delta did a lot."

Now, the carriers are starting to switch their mind set on how the contracts should be structured.

For example, the carriers have started to increasingly ask for higher fuel costs to be added to the negotiated contract fares, a practice that has reached a higher tempo during the past year, Burke said.

The carriers have to wait about two weeks after making such increases on the commercial side, and the increase is usually less than the commercial one, but government travelers now have to pay more attention to warnings on the GSA website about possible fuel surcharge increases, Burke said.

More far-reaching, though, is the desire of carriers to get the government to be more "commercial-like" in its negotiations and contracts, Burke said.

The carriers would like the GSA to guarantee more advance capacity and then pay more for last-minute purchases than is set now in the current two-tiered system, he said.

"They still would like to control yield," Burke said.

One way to do that is to better manage supply and demand. More advance capacity guarantees would certainly help.

Burke said the GSA was analyzing the request. 

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