Northwest Slashes Ticket Prices by as Much as 40%

Northwest Airlines Corp. on Wednesday cut its regular prices on advance-purchase tickets by as much as 40%, hoping to spur sales as the airline industry enters a traditionally slow time of year.

The nation’s fourth-largest carrier said its new prices will be available for peak travel times, although some restrictions still apply. Fares will be cut as much as 40% on 21-day advance tickets, and about 30% on seven-day and 14-day advance tickets.

Northwest’s new prices, which take effect immediately, will still be about 20% higher than sale fares available until the end of the week. Northwest said it expects the change to add about $1 million to $2 million monthly to its profit by encouraging more passengers to buy ahead of time at regular prices rather than wait for fare sales.

Analysts said the move isn’t comparable to a “value pricing” effort by AMR Corp.’s American Airlines in 1992 and therefore probably won’t spark a costly fare war the way AMR did.

“This is an experiment, and if you’re going to experiment, this is a good time to do it,” said Steve Lewins, a Gruntal & Co. analyst, noting traffic generally drops about 30% this time of year.

On Wednesday, Northwest’s cuts were matched immediately by American Airlines and UAL Corp.’s United Airlines.

Northwest shares, which fell to as low as $37.63, rose 94 cents to close at $38.69 on Nasdaq.

The company said it currently sells only about 2% of its tickets at the 21-day advance-purchase prices. That’s down from about 12% in 1994.

“These fares were basically unaffordable to the most price-sensitive travelers,” said Michael Levine, Northwest’s senior vice president of marketing and international. He said Northwest hopes the convenience of booking lower prices any time will attract more customers.

Northwest estimated that 60% to 65% of its passengers are leisure travelers.

Levine said Northwest’s plan is different from American Airlines’ value prices because American lowered business fares and eliminated several price categories.

Under the new fares, Northwest’s list price for a round-trip flight between Los Angeles and New York, previously $953, will be $568, compared with the current sale price of $529 for off-peak travel.