Airline Battle Is Shaping Up in California : Transportation: Southwest and United are adding flights and cutting some fares. USAir, which is already losing money in the state, will be pinched further.
A dogfight is developing among several major airlines for control of California’s skies.
The latest skirmish came Wednesday, when Southwest Airlines announced plans to bolster its California service with daily flights between Burbank and Oakland--immediately triggering a mini-fare war.
United Airlines quickly said it will match Southwest’s $59 unrestricted one-way fares when it begins service from Burbank on May 1, and USAir, which now charges $164 one-way, said Southwest’s move was under review.
Southwest’s action followed a sweeping expansion announced by United last week. United said that besides pushing into Burbank, it planned to start half-hourly flights between Los Angeles and San Francisco in April, a major step toward capturing a bigger share of the nation’s busiest air corridor.
United is also expected to announce an expansion at John Wayne Airport later this month.
The moves by Southwest and United are especially bad news for USAir, which has lost ground in the state since its 1986 acquisition of Pacific Southwest Airlines. The airline has reduced its capacity in California by 25% over the last 18 months and acknowledges that it is losing money here.
Though United and Southwest say their expansions aren’t aimed at USAir, both carriers plan to fly circles around it. United and Southwest say they will use new Boeing 737 jetliners on their flights, while USAir uses smaller British Aerospace jets as well as larger aircraft.
Southwest says it plans 10 round-trips daily from Burbank to Oakland, double what USAir currently offers. Between Los Angeles and San Francisco, USAir has hourly flights.
Industry analysts say United is most likely to have a greater impact on the market because of its size and its presence at the state’s busiest airports, Los Angeles and San Francisco. Though its expansion isn’t without risk, marketing executives at competing airlines said it made sense because United not only stands to strengthen its position in the corridor, but feed its transcontinental and transpacific routes as well.
Airline industry analysts said it is doubtful that USAir, already burdened with problems related to its 1987 acquisition of Piedmont, would match its competitors’ expansion moves by increasing service in the California corridor. As a result, USAir’s position in California is likely to slip further.
“It is just possible that United could run them out of the market,” said an airline marketing executive who competes with United and USAir.
That would mark a change in strategy for USAir, which in the past has stated it intends to remain in California. In an interview with The Times last fall, Chairman Edwin I. Colodny agreed his airline faced intense competition but had “no intention of disappearing.”
Though potentially crippling for USAir, the expansions planned by Southwest and United should be good for consumers, at least initially. Southwest is a low-fare carrier, and United is expected to stimulate demand for its new flights from Los Angeles International with low introductory fares. American Airlines and USAir are expected to match any fare reductions announced by United.
But if competition forces an airline out of the market, fares could ultimately rise.
Air fares in California have come under scrutiny lately in the state Senate, which passed a bill earlier this week that would create an office to investigate airline complaints, particularly complaints about fares. Supporters of the bill claimed air fares in the state have risen 40% during the last decade, while fares outside the state have declined.
Some contend that the fare hikes are related to a drop in competition in the state, as other airlines besides USAir have pulled back. American Airlines, which acquired Air California in 1987, has reduced its capacity in the intra-California market by 40% during the last 18 months in order to shift aircraft to the East Coast to develop a new hub in Miami.
Delta Air Lines and Alaska Airlines have also reduced their capacity in the corridor, but neither airline was a major factor in the intrastate market.
United and Southwest say cutbacks by other carriers created opportunities for growth.
“We expect the market to balloon immediately,” said Herbert D. Kelleher, Southwest’s chairman. Stimulated by low fares, Kelleher said traffic to Oakland grew 31% after the airline started flights from there to San Diego, Ontario and Phoenix last year. “I expect we’ll be in a position to expand service from Burbank in three months.”
Besides announcing its expansion into Burbank, Southwest released its earnings Wednesday. The airline said profit in the fourth quarter fell 49.5% to $8.1 million, largely due to a 37% jump in fuel costs, while revenue rose 13.2% to $255.6 million. Profit for 1989 rose 23.5% to $71.6 million while revenue increased 18% to $1.015 billion.
DOGFIGHT OVER CALIFORNIA
Chart compares each airline’s share of available seats between the Los Angeles Basin and Bay Area airports. For example, United had 9% of the seats in August, 1988, compared with 22% now.
