Falling Fares To Test Airlines' Staying Power
FRANCINE LAPORTE of Brooklyn knows she got a bargain in the latest round of air fare wars but does not see how the industry can possibly come out ahead.
"A few weeks ago I spent $840 for two round-trip tickets to San Francisco for my husband and me," says Mrs. LaPorte, a French major at Hunter College who is taking the trip as a graduation present. "Now both of us are going for $420. The airlines have got to be losing money."
Many analysts agree that the industry cannot recoup in added traffic what it is losing in revenue with the current 50 percent slash in domestic discount fares.
"What we thought might be a chance of a break-even year for the industry is now turning into a loss - maybe even comparable to last year's $2 billion loss," says Lee Howard, president of Airline Economics Inc., publishers of an airline quarterly that tracks industry economic trends. "I'm having a tough time seeing the logic of this."
Any projected turnaround in airline industry earnings has been postponed until at least 1993, says Barry Gordon, president of the John Hancock National Aviation & Technology Corporation, a mutual fund specializing in aviation.
The newest chapter in the air fare wars began early last week when Northwest Airlines announced a promotional two-for-one discount fare in which adults accompanying a child could fly free. A day later American Airlines, which in April had introduced a simplified four-tier fare structure that it expected the rest of the industry to follow, countered with a deep 50 percent cut in all restricted domestic discount fares. Other airlines quickly matched the American plan. Even Northwest by week's end was adver tising that its family fare had "grown up" and that everyone "gets 50 percent off." Battle for market share
Mr. Howard calls the latest turn a "oneupmanship" fare war in which American, rather than matching Northwest's fare, outdid it. "American wants to stay in control," he says.