Simpler Airfares Are on the Horizon

Delta Air Lines Inc. unveiled a stripped-down fare structure that slashed domestic ticket prices by as much as 60% and eliminated the unpopular Saturday night stay-over requirement, moves that benefit travelers but further threaten the troubled airline industry.

The action Wednesday by the nation’s third-largest airline, which had been expected, is the biggest effort in more than a decade to simplify the industry’s often Byzantine menu of fares.

A couple of major carriers immediately said they would match Delta’s fares along some routes, and analysts anticipated that more would follow.

That’s welcome news for travelers, who already were enjoying the seasonal price cuts offered by the airlines during the slow winter months.

“I’m excited,” Nancy Benoit, a marketing director for Nike Inc., said Wednesday after she arrived at Los Angeles International Airport on a Delta flight. “This could be good.”

Delta capped all coach fares -- including last-minute walk-up prices often purchased by business travelers -- at $499 each way. Delta said it also would cap first-class seats at $599 and trim the number of fares it charges.

The Atlanta-based carrier joined some smaller airlines in dumping the Saturday night stay-over that irritates many business travelers. Other large airlines often require a Saturday night stay to qualify for cheaper tickets.

US Airways and Northwest Airlines Corp. swiftly matched Delta’s reduced fares in selected markets, and the cuts should “be adopted by the other major carriers such as American, Continental and United over the next 24 hours,” said Tom Parsons, chief executive of Best Fares USA Inc., an Internet travel site.

If that happens, the industry could see a drop in revenue of $2 billion to $3 billion this year, according to Merrill Lynch & Co. analyst Michael Linenberg. That would be a decline of 3% to 4%.

Delta’s move could even mean “the demise of US Airways,” with which it competes in many markets, Linenberg said in a note to clients.

Concerned about the escalating fare war, investors sold off airline stocks Wednesday.

Delta shares fell 51 cents, or 7%, to $6.80; American Airlines parent AMR Corp. lost 96 cents, or 10%, to $9.05; Continental fell 99 cents, or 8%, to $11.21; and discount carrier Southwest Airlines Inc. was unchanged at $15.61. All trade on the New York Stock Exchange. Northwest dropped $1.04, or 11%, to $8.60 on Nasdaq.

Delta and the rest of the airline industry have lost more than $27 billion since the 2001 terrorist attacks, in large part because fares have not stayed lofty enough to cover the big airlines’ relatively high operating costs. This year’s soaring jet fuel prices and the airlines’ gigantic debt loads exacerbated the problems.

United Airlines and its parent, UAL Corp., are in bankruptcy proceedings. So is US Airways Group Inc.

Delta, meanwhile, narrowly escaped a bankruptcy filing recently by obtaining $1 billion in annual concessions from its pilots.

Even as they struggle, analysts say, major “legacy” airlines such as Delta have little choice but to permanently cut and simplify fares. That’s because they are increasingly losing business to aggressive discount carriers such as Southwest and JetBlue Airways Corp.

Indeed, Southwest on Wednesday announced that its newest target was Pittsburgh, where it plans to launch service in May. The city long has been a stronghold of US Airways.

“The market is clear in stating that it wants simple, transparent and cheap when it comes to fares, and passengers -- whether corporate or individual -- are rewarding the airlines that offer that,” said Ron Kuhlmann, vice president of Unisys R2A Transportation Management Consultants in Oakland.

Although smaller carriers such as Alaska Airlines have implemented simplified fares, Delta’s move was the biggest by a major carrier since American Airlines rolled out its “value pricing” plan 13 years ago.

Delta tickets still carry some restrictions, however, including an overnight-stay requirement in certain cases.

Under Delta’s plan, the main beneficiaries would be business travelers, who often buy seats at the last minute and, therefore, tend to pay the highest prices. For example, a last-minute Delta coach fare from Burbank to Boston would be reduced 60% to $499 from $1,253, the airline said.

“We certainly welcome the savings,” said Bill MacKenzie, a spokesman for Intel Corp., which like many companies is trying to keep a lid on travel costs.

John Moore of Los Angeles, who was at Delta’s LAX terminal to meet his wife and daughter on Wednesday, said he welcomed the new round of fare cuts by Delta -- provided it wasn’t a gimmick that would end quickly.

“If it stays lower,” he said, “that would be good.”

To be sure, the airlines still have to lower costs to survive, especially as they keep shaving fares.

Nearly all of them are negotiating with their unions to wring more concessions from employees, many of whom already have provided extensive givebacks in recent years. United, for one, has asked a U.S. Bankruptcy Court judge to toss out its union contracts if the airline can’t first reach an agreement with its workers.

United -- the largest operator at the Los Angeles and San Francisco airports -- also wants to dump its employees’ main pension plans to save cash. A hearing on the matter is scheduled for Friday in Bankruptcy Court in Chicago.

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Times staff writers Ronald D. White and Melinda Fulmer contributed to this report.