Baltimore's air fare wars

August 20, 1993

Air fare wars have broken out at Baltimore-Washington International Airport. The downward bidding got so intense this week we hesitate to quote the latest fares for fear they will be out of date by the time you read this editorial.

The reason for these cheap tickets is the impending arrival at BWI of Southwest Airlines. It is simultaneously a low-fare airline and the only large airline to show a profit in the past four years. Its secret: getting fares down to the point where they compete not just with other airlines but also with buses, trains and automobiles.

Right now it's the other airlines who are concerned. In the short run, they have a lot to be concerned about. Southwest is imposing fares to Chicago and Cleveland that may be profitable for it but which are disastrously low for full-service airlines.

But to protect their market share, USAir and other established airlines are meeting Southwest fare cut for fare cut. Southwest can make money at these low fares because its costs are 25 percent below the industry average. It doesn't reserve seats in advance, serve meals or transfer baggage. It does load and take off more quickly than its competitors, giving it an enviable on-time record.

One winner in all this is BWI itself, and indirectly the Maryland economy. Experience elsewhere shows conclusively that no-frills airlines like Southwest generate a lot more traffic. Some passengers are attracted to flying when it becomes competitive with surface travel. As new flyers start using airports, some of the business spills over to other airlines.

In the case of BWI, which is seeking passenger growth from the Washington area, it could become a more attractive alternative for travelers who now use National or Dulles airports. Once they discover that BWI isn't all that far from their homes or offices and is a lot easier to use than the Washington airports, they could return for flights to places Southwest doesn't serve.

But neither BWI nor the local traveler will be a winner in the long run if the competition gets self-destructive. Right now that is a slim prospect, since Southwest will fly only two routes here -- at least initially. If USAir and the other airlines at BWI pick up enough traffic elsewhere to make up for the losses they will suffer competing with Southwest to Chicago and Cleveland, everyone comes out ahead. But if USAir is hard hit, that could be a blow to BWI and the local economy in the long run. That airline does, after all, handle more than half of the passengers using BWI.

5/8

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