Budget Airlines Poised for a Dogfight in California : Travel: Expansion plans of Reno and Southwest could boost passenger traffic to levels not seen since the mid-1980s.
California is shaping up as the major battleground for two low-cost carriers--Southwest Airlines and Reno Air--and that could lead to lower air fares for travelers.
Reno Air on Thursday unveiled a schedule of low-fare flights from San Jose, where the carrier will begin flying to Los Angeles, San Diego, Ontario and other West Coast cities within the next two months. A regular one-way ticket between Los Angeles and San Jose, for instance, will cost $100, compared to the $180 now being charged. A one-way discount ticket will cost $60.
Southwest, meanwhile, plans to begin serving San Jose next week with low-fare flights to Burbank and Las Vegas. The Dallas-based airline plans to expand San Jose service to other California cities, putting it on a potential collision course with Reno Air. Southwest’s current one-way fares within California range from $49 to $69.
If Reno goes ahead with its plans, “then we are going to run up against them,” said Edward Shelswell-White, marketing manager for Southwest in Los Angeles. “It’s going to be interesting.”
The expansion of two low-fare carriers within the state could dramatically boost passenger traffic to levels not seen since the mid-1980s, when Air Cal and Pacific Southwest Airlines fought it out with cheap fares, said David Ulmer, an airline industry consultant at Roberts & Associates in Hayward, Calif.
Traffic dropped and fares climbed after Air Cal and PSA were merged with larger carriers. The number of passengers flying between Los Angeles and San Jose, for example, has fallen from more than a million in the mid-1980s to fewer than 600,000 last year, Ulmer said.
Reno and Southwest “are pretty much in the same market,” he said. “They take traffic off the highway” and put it on airplanes.
Southwest, which has become the largest carrier within the state, has driven out competitors--such as American, Delta, United and USAir--that were unable to match its low fares and still generate a profit.
Reno, however, is blessed with low operating costs that will permit it to operate profitably in the era of low fares created by Southwest, industry analysts say. At San Jose, Reno has leased airport gates from American, which has been trimming service in part because it cannot compete effectively against Southwest.
“Reno has the potential of making money in those markets where American didn’t,” Ulmer said.
While Reno’s fares tend to be higher than Southwest’s, the smaller airline--unlike Southwest--offers services such as assigned seating and frequent-flier miles on American that appeal to business travelers.
“From a travel agency point of view, it’s much easier to sell a Reno Air flight,” said Jim M. Roberts, president of Uniglobe Regency Travel in Rancho Cucamonga. “It will hurt Southwest more than it will Reno” if the two carriers go head-to-head, he said.
Tom Parsons, editor of Best Fares magazine, says both carriers will try to avoid direct competition. But even if they don’t, Southwest, Reno and other so-called niche carriers will push down fares in the new markets they serve. As a result, the larger airlines, with higher costs, may be forced to cut prices further or abandon more routes.
