Continental Fare Increases Aimed at Business Travel

In a move designed to garner more revenue from business travelers, Continental Airlines said Thursday that it is raising some of its one-way coach fares.

The new structure--called “restructuring and realigning” by the airline--will continue to offer discounts, but mainly to passengers able to buy their tickets in advance. The changes, it said, affect fares “used mostly by business fliers.”

The new fares, which will apply to tickets bought after March 15, will require travelers seeking discounted fares to book seats and purchase tickets either four or seven days in advance, depending on the route involved. The tickets will be subject to a 25% cancellation penalty.

Continental’s action was seen by analysts as significant. Louis Marckesano, airline analyst with the Philadelphia brokerage of Janney Montgomery Scott, said half of all airline customers are business travelers and, since they pay higher than average fares, they account for 65% of the airlines’ revenues.

A one-way full coach fare between Newark and Los Angeles, for example, will rise to $450 from $360. A discounted fare with the restrictions, including a seven-day advance purchase, will also rise--to $345 from $305--but will still represent a saving over the full coach fare.

Although the discounted tickets will require advance purchase, they will not require the purchase of a round-trip ticket or a Saturday night stay-over, as some of the deep-discount fares do. Continental’s deep-discount fares are called Maxsavers.

“While this move is positive for the airline industry,” said Paul Karos, airline analyst with the New York brokerage of L. F. Rothschild & Co., “it is negative for the business traveler. It is aimed at getting more revenue out of corporations.”

After the changes, Houston-based Continental said, its unrestricted coach fares will remain between 10% and 20% below fares charged by its competitors.

The fare increases announced Thursday will affect only a few Maxsaver fares, which are more heavily restricted and are used mostly for leisure travel. With first-quarter traffic stronger than expected, all major U.S. air carriers last week raised these deep-discount fares by $10 round trip. That move was begun by USAir and was matched by Continental and others.

Aim to Offset Losses

Analyst Marckesano said Continental is raising fares now because its business is improving. The airline, he added, has chosen to attempt “to increase revenue by raising prices rather than (by further) stimulating traffic.”

The first quarter of the year is usually a period of losses for most air carriers, Marckesano added. Continental’s fare increase, if it is matched by other carriers, “will allow the airlines to come back from these losses two months earlier than they did last year when they could not raise prices until mid-May.”

Dallas-based American Airlines said soon after Continental’s announcement that it would match the fares on routes where it competes with Continental. United Airlines, based in Chicago, said it was studying the new fares.