Some Airlines Trim Expensive Business Fares

Several major airlines--including American, Northwest Airlines Corp., Delta Air Lines Inc. and Continental Airlines Inc.--have cut many of their most expensive, unrestricted business fares 15% to 20%, a move Northwest said Tuesday was the first reduction in the controversial fares in perhaps a decade.

The cheaper prices are welcome news for business travelers, who have been howling for years about the high cost of last-minute, walk-up seats. With the economy weak and companies slashing travel budgets, a growing number of business fliers are opting to buy cheaper fares with advance reservations, or not fly at all.

That’s a huge reason the big airlines continue to suffer massive losses; the industry lost more than $1.4 billion in this year’s second quarter. Because they typically pay more than leisure travelers who book well in advance, business customers generate most of an airline’s revenue.

American, the world’s largest carrier and a unit of AMR Corp., quietly initiated the cuts Friday by offering them through a select number of travel agencies. After Northwest learned of the reductions, “our response was to match the discounts, but in a way that the tickets could be sold by any travel agency, not just a select group,” Northwest spokesman Kurt Ebenhoch said.

Northwest then cut the fares even further, which American matched. The cuts take effect immediately and apply to travel from now until June. Northwest’s round-trip walk-up fare from Los Angeles to Miami fell nearly 20% from $2,344 to $1,896, excluding fees and taxes.

Delta and Continental said they matched the lower fares on many routes where they compete with the other two carriers. United Airlines, a unit of UAL Corp. and a leading carrier for business travel, said it was “monitoring” the situation.

Some analysts said it appeared that American--by making its initial cuts through certain travel agencies instead of across the board with fanfare--was maneuvering to get a jump on Northwest and others to gain market share, rather than luring business travelers on a large scale.

But Kevin Mitchell, head of the Business Travel Coalition, an advocacy group for business passengers, said American’s lower walk-up fares appeared aimed at small and medium-sized companies that don’t typically qualify for corporate discounts. Those firms are the ones that now are “purchasing 80% to 90% of their tickets on a restricted basis” at fares cheaper than the unrestricted walk-up fares, he said.

American spokesman Todd Burke said “it’s not unusual for us to offer promotions to select agencies,” but he declined to provide details of the cuts or discuss American’s motivation. “For competitive reasons, we’re not going to discuss pricing strategies,” he said.

The moves by American and others heightened the industry’s bid to win back business travelers. Several smaller carriers, such as America West and American Trans Air, a unit of ATA Holdings Corp., already have cut unrestricted business fares in recent weeks.

It’s “a gigantic step in the right direction,” Mitchell said.

Surveys of his members have shown that a cut in published fares of at least 20% to 25% would be needed “to get them to come back in numbers that are even close to those we had in 2000,” before business travel plummeted, he said.

AMR’s stock rose 38 cents to $9.33 on Tuesday, while Delta climbed $1.40 to $15, Continental edged up 14 cents to $8.95 and UAL rose 11 cents to $4.34, all on the New York Stock Exchange. Northwest gained 35 cents to $8.08 on Nasdaq.

Delta today is expected to launch a 48-hour sale with cuts of up to as much as 75% in business and leisure fares to Europe, Latin America and other foreign destinations for travel this fall.

For example, the round-trip economy fare on its flight from Los Angeles to Stuttgart, Germany, is currently $1,144, but will drop to $660 from Sept. 5 to Oct. 31, and then to $440 from Nov. 1 to Dec. 12.