American Airlines Reverses Course on 1st-Class Fare Cut

AMR Corp.’s American Airlines reversed course Thursday and said it would not follow Northwest Airlines Corp. in cutting first-class fares by as much as 60% to attract business travelers.

American initially matched Northwest, which on Wednesday created what it called First Class BizFlex fares. But the company dropped the change after Continental Airlines Inc. declined to follow suit and UAL Corp.’s United Airlines didn’t immediately adopt the change.

Delta Air Lines Inc., US Airways Group Inc. and America West Holdings Corp.’s America West Airlines said they stood by their decisions to match the fares.

“After looking at the economics of the market, we just decided not to keep the fares,” said John Hotard, a spokesman for Fort Worth, Texas-based American.

Airlines sometimes reverse positions on fare discounts or increases if rivals don’t quickly match the prices. American’s reversal reflects the tension between wanting to attract more business travelers and the fear that discounts could reduce sales and profit. Fewer business-fare travelers and high fuel prices contributed to first-quarter losses at eight of the 10 biggest U.S. airlines.

Under the new plan, a Delta first-class, full-fare return from Norfolk, Va., to Los Angeles, for example, has dropped from $2,072 to $1,217, said Russ Williams, a spokesman for the airline. That price is conditional on a 14-day advance purchase with a one-night stopover.

“Our intention is to keep [the lower fares] in place,” said Kathy Peach, a spokeswoman for St. Paul, Minn.-based Northwest.

Northwest’s new fares require purchases no less than 14 days before travel--a longer period than typical business tickets--and at least a one-night stay. It’s the first widespread cut in business fares since February 2000, said Terry Trippler, who monitors ticket prices for OneTravel.com.

Business fares are among the highest because they usually require little or no advance booking.

The restrictions on the lower fares mean travelers are more likely to trade up from coach than to move down from full first-class fares, said James Higgins, an analyst with Credit Suisse First Boston.

The new fares, unlike most business tickets, are nonrefundable.