Major Fare War Heats Up Skies

Ryan Coon is the kind of customer any airline would hate to lose.

As marketing manager for an international beverage company in Dallas, he makes about 30 business trips a year - almost all of them on American Airlines.

But last week, as a pilot strike at American began to appear likely, Mr. Coon was forced to spend several grinding hours on the phone, rebooking flights he'd scheduled weeks ago.

In an attempt to recoup these lost reservations, and to mollify frustrated customers, American has slashed many of its fares by up to 50 percent - sparking one of the largest airline fare wars in recent memory.

Although American's reservation lines are operating at 800 percent above normal this week, it's unclear how many of the company's bedrock customers will return.

In a business where the only palpable difference between most competitors is the insignia on their luggage tags, American is about to learn what happens when one company stands out.

If Coon's reaction is any measure, it won't be pretty. "It's irritating to me that American's pilots are the highest paid in the industry, and they're the ones talking about a strike," Coon says.

Even though American controls 70 percent of the traffic at the city's largest airport, he adds, he's determined to fly on other airlines, "even if I have to make a connection."

By Feb. 18, Continental, United, America West, and Northwest airlines had matched American's fares, and Delta, TWA, and USAir were contemplating similar moves. In most cases, American is offering 50 to 55 percent discounts off normal full-coach fares until March 3. The cost of a refundable full-coach fare from Dallas to San Francisco, for example, has fallen from $650 to $328.

In addition, American and many other carriers are doubling frequent-flier miles, eliminating advance purchase requirements, and expanding the number of routes that apply for special weekend getaway rates. After placing ads in most major newspapers, American logged more than 2 million calls to its reservation lines on Feb. 17 alone. Many callers were greeted with a message asking them to try again later.

Although the sale will certainly boost travel in the coming months, industry analysts say it's too early to know what effect the narrowly averted strike, and the fare war itself, will have on the industry's bottom line.

According to Michael Boyd, a Colorado-based airline consultant, all airlines have suffered from last week's labor strife. As the strike deadline approached, he notes, thousands of travelers made backup reservations on other airlines, taking up valuable spaces that went unoccupied after President Clinton intervened the morning of Feb. 15.

At a time when most carriers are flying smaller airplanes and relying on advanced ticketing systems to anticipate demand, he says, the fare war could force the entire industry to endure several months of dampened profits.

"It's both a challenge and an opportunity for us," says Joe Hopkins, a spokesman for United Airlines. Although the fare war will cost the carrier money and put a tremendous strain on its flight attendants, mechanics, and baggage handlers over the next few months, he says, the company also views the current climate as a chance to woo cost-conscious customers.

"This is a very price-sensitive business," he adds. "We don't want price to be a reason for people to book away from United."

Yet Mr. Hopkins, like many industry cognoscenti, know that the real prize up for grabs is the loyalty of frequent business travelers like Coon, who are often willing to pay a premium for convenience and service.

"If we do our job well," Hopkins says, "if people perceive our service to be better than American's, then we'll pick up some new customers."