New Setup in Air Fares Wins Praise : Transportation: Business fliers like it. TWA says it won’t go along--but will cut prices.

A revamped air fare system that will affect most domestic airline travel beginning today has met with widespread support among business passengers and travel agents, but one major carrier responded Sunday by rejecting portions of the new system and cutting prices.

Travel agents and corporate travel managers have been busy handling customer questions ever since the new fare system, which offers substantially reduced prices for unrestricted coach and first-class tickets, was announced late last week by American Airlines.

Of the major carriers, only Trans World Airlines and Southwest have not adopted the new fare structure. Both airlines, which cater to bargain-minded travelers, pointed out that most of their fares are still cheaper than the lower prices adopted by most of the industry.

On Sunday, TWA, which filed for Chapter 11 bankruptcy protection from creditors earlier this year, said it will cut some of its fares by 10% to 20% to maintain its price advantage over other carriers. By doing so, TWA Chairman Carl C. Icahn said the airline will try to keep its fares 35% to 40% below American in many markets.

In addition, TWA said it will retain the discounts that have been eliminated under the new fare structure, and passengers will not be charged a $25 fee to change or refund tickets.

“We will continue to keep this gap alive,” Icahn said in a teleconference with reporters. “We intend to give corporate discounts and, in fact, we intend to put on a full-court press in that area.”

In the next few weeks, the airline will also unveil a “dramatic” fare schedule aimed at leisure travelers, Icahn said.

The new fare structure initiated by American prompted many passengers to call their travel agents to see if they could exchange old tickets for lower fares under the new system, said Tom Nulty, president of Santa Ana-based Associated Travel Management.

“We spent all day Friday and late into the night talking and exchanging tickets,” said Nulty. “Most of the calls are from people just trying to find out what is gong on.”

Under American’s new system, the confusing array of ticket prices and types would be pared down to four basic groups: first class, coach and two discount fares. Prices of unrestricted coach fares would fall by at least 38% and that of first-class seats by 20% to 50%.

The two other types of fares offer a limited supply of discount tickets that must be purchased either seven or 21 days in advance. The discount tickets require a Saturday night stay and are non-refundable but can be used for a later trip on the same itinerary for a $25 fee.

The new fare schedule, however, will do away with a profusion of discounts for corporations, convention goers, military personnel and other groups.

Most of American’s competitors, including Alaska Airlines, America West, Continental, Delta, Northwest, United and USAir, matched the new, lower fares.

The new fare schedule reduces much of the price gap between discount and unrestricted coach and first-class fares, which few people used. The airlines anticipate that the lower coach and first-class prices will reduce the economic incentive for passengers to buy discount tickets as well as stimulate additional traffic.

Most travel agencies were working feverishly late last week to modify their computer systems to reflect the new fares. All but 70,000 of the 500,000 fares in American’s reservation system will be eliminated.

“Yesterday (Thursday) we had eight to 10 (computer) screens of fares,” said Jack Revel, president of Revel Travel Service in Beverly Hills. “The process of readjusting is very time-consuming. We also have to handle the volume of calls.”

However, some agencies, will wait to see if the airlines stand by their announcements before committing to any programs.

“It appears to be favorable, but it’s complex,” said one travel agent.

Business travel managers are optimistic that the American-led effort will succeed. The new schedule eliminates two negatives for spur-of-the-moment travelers, such as business executives: The lower coach fares allow the customer to cancel with only a $25 penalty and do away with the cumbersome overnight stay, often a requisite part of a discount package.

“My first-day impression is that the benefit is tremendous in a positive sense to the business traveler,” said a travel coordinator for Mitsubishi Electronics Inc. of Cypress.

This is not to mention the savings involved. With about 2,000 of its employees routinely traveling, Mitsubishi has a travel budget of roughly $11 million.

The Mitsubishi official said he was worried about the company losing its 45% discount on full-coach fares and 5% mark-off on discount fares under American’s new plan. But he found after calculation that Mitsubishi would actually save 20% on its domestic fares over those routes included in the schedule.

However, travel agents pointed out that lower fares for consumers mean lower commissions for them. In addition, industry insiders said luring vacationers with minimally discounted prices is unlikely and only time can gauge the program’s success.