People Express bids on cross-country route.
To hear People Express decribing its New York to Los Angeles gambit, it sounds as if they just had a couple of Boeing 747 jets kicking around and had to use them somewhere. ''We weren't going to use them on the Newark to Hartford run ,'' muses a spokesman.
Despite the cavalier attitude, this weekend People Express takes a serious leap into the transcontinental market: one-way flights between Newark, N.J., and Los Angeles for $119 off-peak and $149 during peak travel times.
But the competition is not planning to be taken for a ride. Four major carriers on the route have slashed their fares in response.
Could this erupt into a wider fare war? Will there be a return to the melee of $99 cross-country flights?
It's doubtful, most airline analysts say.
''This is a specific action. It applies to a specific market,'' says Alfred Norling, an analyst at Kidder, Peabody & Co., the New York brokerage house. But , he notes, ''It could spread to peripheral markets, like San Diego on the West Coast and Boston or Philedelphia here.''
Robert Joedicke agrees that this won't trigger a fare war - not yet. ''It will not be coming now, during the peak summer period. It remains to be seen what happens after Labor Day when the summer traffic tapers off,'' the Shearson Lehman/American Express analyst says.
United Airlines, the major New York-Los Angeles carrier out of Newark, has matched People Express fares but with restrictions.For a round-trip ticket, it requires a seven-day minimum stay and a 14-day maximum stay.
American Airlines, with its Los Angeles flights out of Kennedy International Airport, has also met the People Express $149 fare with a $298 round-trip ticket tied to a seven-day minimum, 21-day maximum stay restriction. And American has a and Pan American have similar offers. All have waived their advance purchase requirements until June 23. On June 25, People Express will add another flight, bringing its total to two a day on the new route.
A TWA spokesman pointed out that although their prices are slightly higher than People Express's, ''the seats are bigger and you don't have to pay for food and luggage check-in.''
The timing of People Express's move is considered wise by analysts. Summer is the best season for the airlines and with the economy zipping along, the market is flush with travelers. Also, the Olympic Games will generate additional traffic to Los Angeles.
Nonetheless, ''It's a big gamble for the company,'' says Mark Daugherty, a Dean Witter analyst. ''They're putting 12 to 15 percent of their capacity into this market.'' And it's more competitive, he adds.
''People Express has flown up and down the East Coast competing with weaker airlines - Eastern, Pan Am, New York Air - and they've done very well. But now they're taking on United and American, who are stronger carriers. It will be interesting to see how People Express fares against stronger competition,'' says Mr. Daugherty.
Mr. Joedicke is less politic. ''When you take on two 800-pound gorillas, you better be prepared to deal with the consequences.'' American and United have ''pretty deep pockets,'' says the Shearson/Lehman analyst.
The New York-Los Angeles and New York-Minneapolis flights are a new tack for People Express. ''They began doing short hauls that stimulated new traffic - it was a diversion from autos. Now they're trying to cut up the pie in a different way,'' Joedicke says.
The three-year-old carrier had lower than expected earnings the first quarter of this year, and the new flights could depress their earnings outlook further, analysts say. ''With start-up costs and low initial loads, I expect it will be sometime before they make money on these flights,'' says Joedicke.
People Express's fare cuts have less impact on the other carriers than it appears, he points out. While other carriers are matching People Express's fares , the time restrictions mean only a few seats on each flight will actually be sold at the lower prices.