Airlines Slash Fares in Fight for Passengers : Travel: New, cheap rates are a boon to consumers but portend a shakeout in the industry.

Major airlines are doing an about-face this week, leaving potential air travelers bewildered--but happy.

Carriers that only last week announced fare hikes as high as 10% because of soaring oil prices suddenly are slashing their domestic ticket prices, following the lead of Trans World Airlines.

The message to consumers, industry executives say, is to buy now but be aware that the new fares bear many restrictions and may not be refundable if travel plans change.

“If you can live with all the nonsense and all the strings, the fares are downright cheap,” said George Gosche, owner of Brentana Travel in Santa Monica.

But cheap fares usually bode ill for the airlines. This latest fare cutting is a desperate attempt by the industry to boost business in a slow season. That, coupled with sharply higher fuel costs, could result in an industry shakeout if enough new travelers aren’t lured by the lower fares, analysts said.

“We’re approaching the final battle in the arena. There aren’t very many Christians left for the lions to eat, so now the lions are eating each other,” said Morton Beyer, chairman of Avmark, an Arlington, Va.-based airline consulting firm.

The outlook for those who fly was pretty bleak last week when airlines started announcing fare hikes and surcharges to cover fuel prices that have jumped about 30% since Iraq invaded Kuwait. Fuel costs generally are an airline’s second biggest expense, after labor.

Some carriers, including American, the nation’s largest, responded with plans to boost ticket prices as much as 10% beginning this week. But they were forced to back off when United Airlines, the No. 2 carrier, and others said they would raise fares only 5.3%.

Then, on Monday, TWA and Eastern weighed in with plans to cut fares as much as 30%. But the fares were available only to the limited number of cities served by TWA and Eastern, two of the smaller and weaker of the major carriers.

Most of the other large airlines responded with price cuts of their own on Tuesday and Wednesday and postponed any fuel-related price increases until at least next Thursday.

But the lower fares are available for only a limited time and the tickets carry several restrictions. They must be purchased by Aug. 29 and used between Sept. 5 and Dec. 16, except for five days around Thanksgiving, a heavy travel period. Many of the tickets cannot be refunded.

Thus, people who can’t make advance travel plans and stick to them--and that includes most business travelers--will not be able to take advantage of the lower fares and probably will pay higher fuel-boosted prices.

“It kind of sounds crazy that, when fuel prices are going up, fares are coming down. But they’re not, really. It’s just a sale,” said Daniel A. Hersh, an airline analyst with the Bateman Eichler, Hill Richards brokerage firm in Los Angeles.

Air travel usually drops about 25% after Labor Day, when the summer vacation season ends.

As for the future of ticket prices, the sky may be the limit.

“The fuel increases being what they have been, logic would dictate that a fare increase has to happen,” said Greg Witter, manager of media relations for Alaska Airlines.

“But the situation is so up and down, it’s hard to tell what might happen by then,” Witter said, referring to Aug. 22, when Alaska is scheduled to reinstate its planned 5.3% increase. “We hope it goes into effect without any market gyrations and promotions muddying the waters.”

TWA spokesman Don Morrison said the carrier cut fares in response to President Bush’s call to the airline industry to help control fuel-related inflation. TWA is waiting for fuel prices to stabilize before deciding on any fare increases, he said.

But, with other airlines’ fares rising, “we thought it was a tremendous opportunity to expose more people to TWA who were holding back because they thought fares were going up,” Morrison said. The strategy may be working, he said, noting that TWA surpassed its old one-day booking record by 30% on Tuesday.

TWA and Eastern cut fares because they saw an opportunity to grab customers from some of the larger and stronger air carriers, and their competitors were forced to follow suit, said analyst Robert Decker of Duff & Phelps, a Chicago-based investment firm.

“The airline industry is so competitive that an airline can’t keep a higher fare longer than a day because people will snap up the lower fares,” he said. The temporary fare cuts will hurt the industry if they are extended past mid-December and if they don’t draw new customers who weren’t already planning trips, he said.

Beyer of Avmark said the fare roller coaster “certainly shows the disarray in the industry.” The last 12 months were the worst ever for the airline industry and a prolonged fare war could force weak carriers out of business, he said.

Some airline executives are not happy about the fare slashing.

“It’s not the brightest thing to do because we’re taking a beating” from higher fuel prices, said Ed Stewart, spokesman for American Airlines. American’s fuel costs are expected in jump $720 million this year, to a total of $2.3 billion.

“Price is how the flying public decides on how to get from Point A to Point B, so we had to respond,” Stewart said. “The consumer will win, but there is no way we can recoup our fuel costs” with the lower ticket prices.

Sales were flying high on Wednesday at Going Places Travel in Arcadia.

“It’s busy,” said manager Pat Gallardo. “Here we were anticipating all these fare increases, and the fares are going down.”

Gallardo’s advice to travelers: Don’t wait.

Staff writer Donna K. H. Walters contributed to this story.