Airlines cut fares to woo back fliers spooked by Y2K
TWA, United, and other major carriers reduce rates for early spring
Now that Y2K worries have passed, airlines are hoping passengers will take back to the skies.
Major carriers began to slash prices for flights across the US this week after a generally lackluster fall and holiday season in which some flights had more empty seats than the opening of the movie "Ishtar."
After TWA announced Monday it would reduce fares on most of its flights - provided tickets were purchased at least two weeks in advance - most of the other major carriers did the same. Some slashed fares up to 50 percent on their most popular routes. United Airlines, the nation's largest carrier; Continental Airlines; and US Airways said Tuesday they would also be cutting prices for travel during the winter and spring.
"The pricing situation now is in response to the low traffic over the last couple of weeks," says Richard Gritta, a business professor at the University of Portland (Ore.) and an expert in the airline industry. "People were concerned about Y2K, and the airlines are trying to get them back in."
Bigger cut than expected
While it is not uncommon for airlines to reduce fares after the holidays - this time between New Year's and spring break is usually one of the slowest of the year for air travel - some experts are surprised at this sudden price war because costs for the airlines have been rising.
For one thing, fuel costs have doubled since this time last year, with the price of a gallon of jet fuel jumping from 34 cents at the end of 1998 to as high as 74 cents in 1999. This increase was due to the highest crude-oil prices since the Gulf War.
Add to this the fact that many of the airlines have been under pressure from their unions. US Airways has been negotiating with its flight attendants over a wage increase, and American Airlines has clashed recently with its mechanics over their pay for overtime.
Even so, despite these two pressures on costs, carriers are anticipating even slower sales in the coming months, leading them to the current price cuts.
What these airlines "are doing is trying to generate leisure traffic volume," says analyst James Higgins of Donaldson Luftkin & Jenrette, adding that airlines regularly reduce fares this time of the year.
However, Tom Parson of BestFares.Com, a clearing house for travel deals, says the reductions are steeper than in the past. He notes that air travel declined sharply because of concerns over possible Y2K problems.
"There are not very many places you can travel where the price is not discounted," he says, adding that fares to Europe should be particularly appealing.
But computer glitches weren't the only worries for passengers these past few weeks, either.
"Some of the other factors involved are the congestion, the crowding, and the fears for safety and security - which have also dampened people's enthusiasm for air travel," says Mr. Gritta.
In the winter months, volatile weather can lead to long delays and last-minute cancellations. A snow storm in Chicago can have repercussions around the world, disrupting travel in Europe and even the Far East. For many travelers, it's just not worth the hassle. "That doesn't portend too well for the airlines' profits," Gritta says.
Outlook for business travel
Business travelers, however, can expect prices to inch up in the future, say industry observers. And with the strong economy, those needing to fly from place to place cannot avoid airport hassles and high fares.
"You can find nary a seat in first class these days," says Rob DeRocker, a business executive who makes two to three trips a month, traveling 60,000 miles a year. "It's very hard to upgrade to first class a few days before traveling."
Airlines are hoping consumers will respond like Michelle Lampmann, a market research analyst in Boston who makes frequent business and leisure trips. "I take advantage of any deals that come up, and if the price is right, I'll travel," she says.
*Wire material was used in this story.
(c) Copyright 2000. The Christian Science Publishing Society