United Cuts Fares, Drops Stay-Overs
In a dramatic bid to lure business travelers back into its planes, United Airlines on Thursday slashed air fares and abolished mandatory Saturday night stay- overs on some of its key national routes.
“This is the spark that will ignite the air fare forest fire,” said Thom Nulty, president of Navigant International, a Denver-based travel management company.
United’s decision is particularly bold, because it sweeps aside the required Saturday night stay-over for super-saver prices on round-trip tickets, Nulty said. That requirement has been perhaps the most onerous restriction on business travelers since the major airlines first offered super-saver fares in the 1970s, he said.
Whenever carriers have relaxed the requirement, air fare wars erupted.
United’s price changes, which went into effect Thursday, affect flights from a number of major U.S. cities--including Los Angeles, San Francisco, New York and Washington, D.C.--to its largest hub, Chicago’s O’Hare Airport.
For example, a round-trip ticket bought one week in advance for a trip from Los Angeles to Chicago now can cost $376 for flights beginning Sept. 5. That’s a fraction of the $2,314 United normally charges walk-up passengers for the same route or the $910 it charges for a two-week advance purchase.
“We’re responding to the competitive pressures we face in the Chicago market,” said Joe Hopkins, a spokesman for United, a subsidiary of UAL Corp.
The new prices, Hopkins said, will last indefinitely. “It’s more of a structural change than a short-term sale,” he said.
United’s move could force other carriers to reduce fares on the same routes or to offer similar deals at different locations, industry experts said.
Delta Air Lines indicated late Thursday that it is preparing a counter offer. “We will be competitive with those prices . . . in those markets,” a spokeswoman said.
And American Airlines, which recently surpassed United as the No. 1 carrier, and Northwest Airlines said they are studying the possibility of following United’s lead.
The collapse of business travel because of the slowing economy resulted in losses for most of the major carriers during the first half of the year. UAL’s second-quarter loss was a wider-than-expected $292 million, or $5.50 a share, as revenue fell 8.8% to $4.66 billion. The airline industry also is contending with higher labor and fuel costs.
Business travelers typically pay higher fares than leisure passengers because they tend to book tickets on short notice. But the slowing economy over the last year has caused corporate America to scale back employee travel.
Though wooing business travelers is United’s primary concern, Nulty said, it is only one of several factors that motivated the second-largest airline to discount fares. United is competing against smaller carriers, such as American Trans Air, which offers inexpensive flights to its Chicago hub at Midway Airport, he said.
ATA, which does not require Saturday-night stay overs, charges $533 for a walk-up round-trip ticket from Los Angeles to Chicago and $210 for a two-week advanced purchase.
Though United spokesman Hopkins declined to name specific airlines, he said “the perception of a lot people in the Chicago market is that you go to Midway if you want low fares.”
United is trying to recapture a share of the market it lost during last year’s contract negotiations, when pilot shortages contributed to 27,000 canceled flights between April and September, Nulty said.
“We have lost some customers from the disruptions last year,” Hopkins said, “We’re eager to win them back.”
Thursday’s announcement was expected to help do that.
“Given United’s poor service record over the past 16 months, I’m saying something I haven’t said for a long time: Fly United,” said Terry Trippler, an airline specialist for online travel agency OneTravel.com.
And for United, stimulating business travel is critical, Trippler said.
“They’ve got to get briefcases back on the airplane,” he said.
UAL shares fell 34 cents to close at $33.96 on the New York Stock Exchange.
