Air-Fare War Hits State for 1st Time in Years : Airlines: Competitors are rushing to match Southwest’s $59 one-way trip from Burbank to Oakland. This may be just the start of price-cutting.
When Southwest Airlines’ Flight 604 takes off for Oakland this morning from Burbank, it will inaugurate not only 10 more daily round trips in the busy north-south corridor but also offer the first cut-rate service in several years.
Southwest’s unrestricted $59 one-way fare is less than a third of the full fares currently charged by its major competitors along the California corridor, the nation’s busiest.
The Dallas-based airline’s entry into that market may force to the surface what has so far been an undeclared price war within California as other airlines increase the number of lower-cost seats available to those willing to accept some restrictions. Already on Friday, USAir said it will offer a $59 Burbank-Oakland “walk-on” fare starting today--on a space-available basis.
Out-and-out price competition within California has been missing in recent years in part because major airlines gobbled up some of the cut-rate carriers that brought the state some of the nation’s lowest air fares. Delta Air Lines swallowed Western Airlines, a national carrier that maintained a heavy intrastate network; USAir bought Pacific Southwest Airlines, the state’s original low-cost flier, and American Airlines took over AirCal, which in 1986 had 252 flights a day within California.
Now, with Southwest’s entry, “You’re probably witnessing some degree of both a price war and a market-share war,” said George Pearson, vice president of Airline Economics, an aviation marketing research and consulting firm in Washington. “It appears to me as though the competition is ramping up for (market) share, and now you’ve got low-cost people like Southwest coming in and bringing low fares with them.
“That will force the major carriers to compete on price. And we are probably just seeing the start of it. You’re going to see not only fare reductions but increases in the frequency of service,” Pearson predicted.
While USAir has maintained hourly flights between Los Angeles International Airport and San Francisco from 7 a.m. to 11 p.m. for more than a year, United Airlines intends to step up its shuttle service next week to offer LAX-San Francisco flights every half hour between 7 a.m. and 7 p.m.
Pearson said flight frequency rose and fell markedly last year, apparently as carriers allocated aircraft to meet prevailing market needs. But at the same time, he added, average fares paid have declined all along the California corridor for at least the past year--even on the controversial Sacramento-Orange County run, where the undiscounted one-way fare is $234.
Between Burbank and Oakland, for example, the average one-way fare that customers actually paid in last year’s first quarter was $97. It dropped to $80 in the second quarter and to $74 in the third. “Now, here comes Southwest with $59,” Pearson said.
“You can see what’s happening,” he said. “It’s good, old-fashioned competition.”
The current undiscounted coach fare between Los Angeles and San Francisco is $186 each way, said Southwest spokesman David Brown. Southwest will fly round-trip between Burbank and Oakland for a top fare of $118.
Seats are available on Southwest--and, soon, some other airlines as well--at even less than $59 one way for passengers who can make reservations from several days to several weeks in advance and meet other conditions, such as staying over Saturday night and not getting refunds.
Southwest chose Burbank, Brown said, partly because passenger “gates” were not available at Los Angeles International. “We have a tremendous problem getting gates at LAX,” he acknowledged, “but that is not the only reason that drove us to Burbank. Burbank offers convenience, among other things, and there are 3.5 million people within a normal service radius.”
Moreover, he said, Southwest’s ability to expand is limited by the number of available airplanes. “We have 100 in the fleet now and orders and options for 85 more in the next decade, but we find business growing so rapidly where we’re already established that Burbank may be the only new airport we can open this year.”
The 20-year-old no-frills airline, 12% owned by its employees, has among the lowest costs in the industry, Pearson said.
Southwest finally achieved major airline status last year when revenue topped the $1-billion benchmark, despite an average fare that Brown said was $57. On sales of $1.015 billion, the company turned a record $71.6-million profit, up 23.5%.
