Major Airlines Starting to Cut Fares
American Airlines on Tuesday matched a promotion by rival United Airlines aimed at luring back skittish business travelers, leading to the first widespread fare sale by major airlines since the terrorist attacks.
The industry until this week was reluctant to slash ticket prices, even though passenger traffic plunged after Sept. 11, stripping the carriers of so much cash that they feared bankruptcy and pushed to secure a $15-billion federal bailout.
But American and United, the nation’s two largest carriers, are offering savings of up to 50% off their normal fares for coach-class seats through Dec. 31. The airlines also jettisoned the requirement for a Saturday night stay, which has long been a nuisance for business travelers.
However, the airlines’ sale requires a 10-day advance purchase for a 25% saving, and 21-day advance purchase for the 50% discount. There also are other restrictions, and some consumer advocates and travel managers questioned why the airlines are still attaching restrictions to fares when so many people are not flying.
“The airlines just don’t get the big picture,” said Kevin Mitchell, head of the Business Travel Coalition, an advocacy group for business fliers. “Even before Sept. 11, there was a backlash against the industry’s complicated, burdensome fare structure.
“They need to get people on the planes immediately, and need a completely new approach to the domestic fare structure,” he said.
But others said they’re detecting a steady, if gradual, rebound in business travel, at least, which could explain why the airlines aren’t abandoning ticket restrictions altogether, a move that might leave them with little or no profit if passenger loads increase.
“Business travelers have started coming back,” said Thom Nulty, president of Navigant International, a corporate travel-management firm based in Englewood, Colo. So the airlines must be careful in tailoring their fare sales “so they don’t slash their incomes in half just to end up with a few more passengers.”
American spokesman Emilio Howell denied that the airline was simply taking its cue from United, which announced its sale late Monday, but rather “decided to do it when we felt it was appropriate.” Both airlines lost two jetliners, their passengers and crews when terrorists commandeered the aircraft Sept. 11 and crashed them.
The fare sale, which also was matched by Continental Airlines on routes where it competes with the larger carriers, requires a one- or two-day minimum stay. Seats at those discount fares are limited, and there is a $100 fee for changing travel plans after the ticket is bought.
“You can’t go to Congress and say we’re hemorrhaging cash, and then in the first major step to get business travelers back have a fare that carries with it a 21-day advance purchase,” Mitchell said.
But United spokesman Joe Hopkins defended the sale and said the restrictions are not onerous. “We’re always going to have certain restrictions around discounted tickets, and an advance purchase is one of those restrictions,” he said.
“The big story here is that it’s a significant dollar reduction to what was available previously, and that the Saturday night stay goes away,” Hopkins said. (Even before Sept. 11, some airlines had offered fare sales excluding that restriction.)
“We need business travelers back, you better believe it. And we’re giving them strong incentives,” Hopkins added.
Before Tuesday, United’s unrestricted fare for a one-way coach seat from Los Angeles to New York was $1,193. Under the sale, a 10-day advance purchase cuts the fare to $890, and a 21-day advance purchase lowers it to $587, Hopkins said.
Navigant’s Nulty said the sale “looks terrific, but it’s very hard for the business traveler to plan 10 days in advance, never mind 21 days. So a small percentage of the business-travel population is going to be able to take advantage of it.”
Nulty also said he’s surprised that United and other major carriers haven’t announced a major sale for leisure travelers, although Alaska Airlines and Southwest Airlines are among the few that have cut prices. But Alaska’s promotion also carries familiar restrictions: travel must occur between Thursday and Dec. 15, there’s a blackout period around Thanksgiving, the fare is nonrefundable and any reservation changes will cost $50.
U.S. airlines were in big trouble even before the terrorist attacks. Business travel, especially, had fallen precipitously during the summer as corporate America abruptly changed its habit of paying high ticket prices for last-minute flights.
Travel executives and industry analysts cited a business backlash against the airlines, with corporate travel managers--fed up with rising fares and worried about the slumping U.S. economy--reining in employees’ travel or hunting for discounted seats.
Then came the deadly attacks, the unprecedented shutdown of U.S. air travel for two days and the plunge in travel, which has prompted most of the major airlines to slash capacities by 20% or more and to announce job cuts of more than 100,000 workers combined.
American this week said the number of miles flown by paying passengers in September plunged 34% from a year earlier, and Continental reported a 31% drop in “revenue passenger miles,” which is a key industry gauge of traffic.
And the Air Transport Assn., the airline industry’s trade group, said passenger demand in the two weeks after the attack fell 40% to 45%, based on daily reports from 11 carriers.
With American and United showing the way, more sales are likely, analysts said. Indeed, Delta Air Lines Chairman Leo Mullin has said his carrier “will absolutely be cutting prices” in the near future.
Meantime, Delta unveiled promotions to boost tourism to New York, including plans for a nationwide giveaway of 10,000 tickets to the New York area over the next six months, and select travel packages that include Delta service.
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Travel Sale
Airlines are using promotions to try to halt the slump in air travel that was aggravated by the terrorist attacks, but the fares still have several restrictions. Here’s a sample of the one-way sale fares being offered:
United Airlines
*--*
Old New unrestricted restricted From / To fare sale fare* Los Angeles / New York $1,193 $587 Los Angeles / Chicago 1,260 619 Los Angeles / Seattle 277 128
*--*
*
Alaska Airlines
*--*
Old New From / To fare fare** Orange County / Oakland $75 $59 Los Angeles / Mazatlan 142 85
*--*
*
* One-way fare based on roundtrip purchase; new fare requires 21-day advance purchase.
**For travel completed by Dec. 15.
Sources: Company reports, Times research
