Faced with a sluggish summer travel season, U.S. airlines plunged into a full-fledged fare war Wednesday when American Airlines slashed in half ticket prices on flights popular with vacation travelers, cutting the cost of a coast-to-coast round-trip ticket to $200.
The temporary fare cut, which was adopted by other major carriers, adds to an already confusing picture facing the flying public. Since American started an effort to control the schedule of fares several weeks ago, the price of airline tickets has continued to gyrate under temporary sales and promotions.
Although the half-price sale will add to the airline industry’s deep financial woes, the fare cut created the bargain bonanza many vacation travelers have been waiting for.
“If I was a consumer today and I had even a little inkling that I wanted to go somewhere, I would go out and book some seats,” said Tom Parsons, editor of Best Fares magazine. “This is going to be one of the best buys in summer travel. I don’t think you are going to see it any better.”
The half-price sale offered by American, the industry leader, applies to tickets purchased at least seven days in advance of travel within the continental United States and requires a Saturday night stay-over. Tickets also must be purchased by June 5, and the travel must take place by Sept. 13. The limited supply of half-price tickets are non-refundable, but can be changed for a future trip for a $25 fee.
Under the sale, a $400 round-trip between Los Angeles and New York purchased 14 days in advance can now be bought at least seven days in advance for $200. Fares will return to higher levels once the sale expires, American said.
The half-price sale was matched by most of the nation’s other major airlines, including Alaska, Delta, Northwest, United and USAir. Travel agents expect a surge in business once the new fares are publicized.
“I almost can’t believe what they just told me,” said Thomas Nulty, president of Santa Ana-based Associated Travel Management, after speaking with American officials of the fare cut. “This is by far the best fare deal that I have ever seen.”
American announced the discount one day after Northwest launched a major fare promotion of its own. Under the Northwest deal, which also was available for a limited amount of time, an adult could fly for free when accompanied by a child.
Northwest was matched by United and other carriers until American came in with its own sale. Now, Northwest said it would retain its Family Fares while matching American’s half-price sale.
Some industry analysts said the half-price promotion and the Northwest Family Fare programs were signs that the industry’s simplified fare system was collapsing less than two months after it was adopted by American.
The new system has grouped tickets into four basic fares: first class; full-fare coach for travel at any time; a discount fare for tickets purchased seven days in advance of travel, and a deeper discount fare for tickets purchased 14 days ahead of travel.
But American and some analysts maintained that the new fare system remains intact. American said Wednesday that it is merely showing it is being flexible when it announced the lower prices. “This shows we can respond to promotions within the (fare) structure,” an American spokesman said.
“I don’t see this (promotion) breaking the fare structure,” agreed Ernest Arvai, an airline industry consultant. “I see the fare structure as holding.”
The new fare system also has been faulted for offering leisure and vacation travelers little in the way of lower prices while offering business passengers substantial price breaks. As a result, many travel agents say the peak summer season has remained sluggish despite hints of an improving economy and abundance of deals offered by hotels and car rental agencies.
“We just don’t see as much discretionary travel to visit family and friends as the airlines had expected and what we hoped would have happened,” said Jim M. Roberts, president of Uniglobe Regency Travel in Rancho Cucamonga. “They (leisure travelers) found out that all the savings were on the business side. It just does not sway them.”
However, Roberts said, the half-price American sale “will make the phones ring.”
Hotels and auto rental firms, which depend on air travelers for a big chunk of their business, should also benefit from the temporary fare cut, travel experts say. But travel agents will earn smaller commissions on each sale-priced seat.
Although the most recent promotions will fill seats, they pose risks and costs for an already beleaguered industry.
The potential losses from American’s half-price promotion would add to a miserable, two-year stretch for U.S. carriers. Such venerable names as Pan American World Airways and Eastern Airlines have disappeared from the skies, while other carriers, such as Trans World Airlines and Continental, have sought protection in bankruptcy court.
Since late in the summer of 1990, when the impact of the recession and the Persian Gulf War first was felt, the nation’s airlines have suffered combined losses of more than $6 billion and tens of thousands of layoffs.
If the latest round of sales and promotions fail to generate enough new passenger traffic, the airlines could suffer even more. Revenues already have dipped as a result of the new fare schedules and a recent run-up in energy prices could boost fuel costs.
“With fuel prices going up and these air fares going down, I would not want to own any shares of airlines stocks this week,” Parsons said.