Continental, other carriers respond to rivals' discounts

AIRLINE OFFERS 'PEANUT FARES'

September 14, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer The New York Times News Service contributed to this article.

Continental Airlines yesterday sent a "back off" message to Southwest Airlines as it introduced "peanut fares" from Baltimore-Washington International Airport to nine cities.

The Houston-based airline cut its unrestricted fares by as much as 72 percent and more than doubled its BWI departures, from seven to 16. In addition, the airline unveiled a new "Add a Penny, Add a Pal" program that allows a companion to fly for one cent each way with the purchase of a round-trip "peanut fare."

At the same time, the nation's airlines, following the lead of Northwest Airlines, cut fares yesterday up to 45 percent on domestic flights through Dec. 16. Tickets must be bought before Saturday.

Continental's announcement -- part of an East Coast fares reduction affecting almost 10 percent of Continental's total 2,100 daily flights -- heightens the intense fare war that began locally two months ago when the upstart, Dallas-based Southwest, said it would begin service at BWI.

That airline begins its low-fare, no-frills flights here tomorrow.

"They're basically saying to Southwest, 'Stay out of our market. Go pick on someone else,' " said Miles Henderson, an airline analyst for Society Asset Management Inc. in Cleveland.

"They [Continental] know that sooner or later Southwest is going to expand on the East Coast. It's just a question of where," Mr. Henderson said.

Southwest, however, has said it has no plans to expand in the near future.

Reflecting Southwest's successful strategy, the financially struggling Continental, which emerged from its second bankruptcy reorganization in April, said yesterday that it will focus increasingly on short-haul markets of less than 500 miles.

"These fares will get people off the highways and off their couches, because the levels make travel affordable for more people," Robert W. Lepisto, Continental's vice president of passenger sales, said during a news conference at the Camden Yards warehouse.

The lower fares, he said, will bring more tourism and convention business to Baltimore and mean a one-third increase in the 60-person Continental staff here.

Effective Oct. 1, Continental's new, unrestricted round-trip fare to Atlanta, for instance, will be $258, compared to the current $652. But for a penny more each way, a companion can fly along, making the round-trip price $258.02 for two.

The peanut fares have no restrictions; seating is not limited. On the "Add a Penny, Add a Pal" fares, seating will be limited on busier flights, the airline said.

In addition to the previously announced prices to Cleveland and Chicago, new discounted fares are being offered, effective Oct. 1, to Greensboro, N.C., Newark, N.J., Buffalo, N.Y., Atlanta and -- Tampa, Jacksonville and Fort Lauderdale, Fla. On Nov. 1, the airline will begin service to Charleston, S.C.

In July, USAir and Continental set off fares wars by matching Southwest's planned $49 and $89 fares to Cleveland and Chicago respectively.

In a particularly aggressive response, USAir also added flights and tacked on a frequent-flier promotion for the two Midwest routes.

David Shipley, a spokesman for USAir, the largest carrier at BWI, said yesterday that the Arlington, Va.-based airline was studying Continental's latest fares.

"We'll just have to wait and see," Mr. Shipley said.

USAir serves all the cities targeted for new fares by Continental, but its costs are roughly 50 percent higher than Continental's.

Continental, which reorganized under Chapter 11, now has far less debt service and lower labor costs than any other airline.

Continental is hoping its new emphasis on short-haul service will pay off. Thus far, its financial comeback has fallen short. After losing $24.4 million for the second quarter that ended June 30, Continental cut 2,500 jobs, retired 30 older planes and eliminated service to nine cities.

While the outlines of the new Continental route strategy had been known since last week, the size of Northwest's discounts disclosed yesterday surprised rivals, even though the industry suspected something was afoot Friday when only Northwest among major airlines did not follow Trans World Airlines' lead by raising domestic round-trip fares by $20.

In the current round of discounting, some airlines, including Northwest, have included flights to Mexico and the Caribbean in the sale. But on all carriers, including American, United, Delta and TWA, the fares are nonrefundable, a Saturday stay is required, flights over the Thanksgiving holiday are out and tickets must be bought at least 14 days ahead. Seats on all flights are limited.

Northwest said its 45 percent discount generally applied on non-stop flights or heavily traveled routes, with shorter flights or those that connect at hubs discounted at 35 percent.

FLYING FOR LESS

Here is a comparison of Continental's old, unrestricted fares and its fares announced yesterday. All fares are one way and effective Oct. 1, with the exception of the Charleston, S.C, fare, which is effective Nov. 1.

C9Destination... ... ... ...Old... ... New... ... % diff..

Cleveland... ... . ... ...$49*... .. $49... ... ... ...

Greensboro, N.C... ... ...249... ... 69... ... ... ..72

Newark, N.J... ... ... ...249... ... 69... ... ... ..72

Buffalo, N.Y... .. ... ...252... ... 99... ... ... ..61

Charleston, S.C... ... ...283... ... 99... ... ... ..65

Atlanta... ... ... ... ...326... ...129... ... ... ..60

Tampa, Fla... ... ... ... 410... ...169... ... ... ..59

Jacksonsville, Fla... ... 336... ... 179... ... ... .47

Fort Lauderdale, Fla... . 410... ... 189... ... ... .54

* Prior reduction

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