Airlines Cut Christmas Fares to Boost Traffic

Encouraged by the response to Thanksgiving discount fares, American and Trans World airlines announced Tuesday that they would join rivals Delta and Eastern in trimming coach ticket prices on their domestic routes for Christmas Day and the two following days. United Airlines quickly followed suit, and Continental said it would match the special fares on routes where its already discounted regular fares are higher.

With Christmas falling on a Wednesday, the airlines are concerned that the three days will be unusually slow. Michael W. Gunn, American’s senior vice president for passenger marketing, said the low fares, which offered cuts of up to 80%, could add significant revenue at minimum cost.

“We’re after the impulse market,” he said during a telephone hookup press conference.

American would be flying its full schedule of 1,200 flights daily, he said, and would have 300,000 seats available at the discounted prices over the three days. TWA, which said it would offer more than 200,000 seats at discount, said it would also cut fares on New Year’s Day and Jan. 2 and 3.

‘Santa’s Escape Fares’

United spokesman Charles Novak said that United had not intended to offer discounts but had decided to do so when its competitors did.

The airlines said the Christmas discounts, which Gunn at American jokingly dubbed “Santa’s Escape Fares,” will be $49 one way on routes of 500 miles, $69 on distances of 501 miles to 1,500 miles and $99 for flights of more than 1,500 miles. For example, the fare between Los Angeles and Dallas/Fort Worth will be $69 each way--79% off the normal one-way $330 coach fare on that route.

However, the discounts will be available on a round-trip basis only. Reservations must be made, and tickets bought, by Dec. 23. Tickets must be paid for within three days of making a reservation and will not be refundable. TWA requires reservations by Dec. 30 for discounts in the New Year period.

Continental spokesman Mike Cinelli contended that the airline’s regular fares already were lower or equal to the special fares and only would have to be lowered for a few of Continental’s routes.

Other Carriers Cut Fares

Delta, Eastern, People Express and Piedmont are among other carriers that already had announced discounts for the holiday period. Delta, for example, announced the Christmas discounts at the same time that it said it would cut fares at Thanksgiving. Its fares, reduced by 70%, apply on all of its routes, except New York-to-Florida, where a fare war already rages. It has no restrictions on buying tickets and its fares are refundable.

Gunn said that, with American’s “Turkey Fares,” which were offered in the slow period on Thanksgiving and the Friday and Saturday that followed, the airline sold 120,000 extra seats at the low prices. He said load factors were “substantially higher” as a result of the discounts, but he declined to reveal how much the airline earned from the extra business.

A TWA spokesman said: “We were very pleased with the response to our special Thanksgiving fares, and we expect equal enthusiasm for our newest low fares.”

But not everybody agrees that the drastic discounts are income producers. “I don’t think they made any money at Thanksgiving time,” said Louis Marckesano, airline analyst with Janney Montgomery Scott, a Philadelphia investment house. “If you had six passengers traveling at the lower fare and one had switched from a full fare, you undo the revenue generation of the other five. The discounts are dilutive because a lot of traffic will be diverted from full fares. I think the carriers barely cover their fixed costs.”

Marckesano also predicted that the Christmas period will be even less profitable than Thanksgiving had been. At Thanksgiving, he said, there is a “dead period” of a few days, but at Christmas there is no such period since people travel from several days before to several days after the holiday. “The departures are not that concentrated,” he said.

And a spokesman at Delta conceded that, although loads increased 55.6% this Thanksgiving over the holiday period last year, the discounts are a loss leader.