Airline fare cuts raise specter of price war

JetBlue slashes tickets as much as 50%, adding pressure on big carriers

July 14, 2004|By KNIGHT RIDDER/TRIBUNE

NEW YORK - In the latest series of price cuts by low-cost airlines, JetBlue slashed fares as much as 50 percent yesterday on a million seats.

The move by the New York airline prompted some analysts to worry that low-cost carriers are leading the industry into a midsummer price war that could damage larger airlines' profits.

Under JetBlue's summer sale, New York travelers can snag fares ranging from $49 to $99 to more than 20 cities in the United States, Puerto Rico and the Dominican Republic.

JetBlue's fares are for travel between Sept. 7 and Dec. 15, except around the Thanksgiving holiday. They must be purchased online by July 29.

In recent weeks other low-cost carriers such as Southwest, AirTran and ATA also have announced discount fares on flights at the end of the summer and early fall.

Through Aug. 5, Southwest is offering $39 to $99 fares for flights through Sept. 20, which is reportedly a discount of about 65 percent from the carrier's regular prices.

ATA Airlines is boasting early fall fares as low as $49 on flights out of LaGuardia Airport in New York. Those tickets must be booked by July 22.

And through tomorrow, AirTran is running sales as low as $44 on fares to all 45 of its destinations. The tickets can be used through Nov. 17.

While the period around Labor Day is always a slow time that prompts price-cutting across the airline industry, analysts said this year's sales are unusual in that they are being announced several months early and are being led by low-cost carriers rather than by the nation's biggest airlines.

Delta Air Lines, American Airlines, Continental Airlines and Northwest Airlines reportedly have already begun reducing their fares to match the competition.

"I think [the traditional airlines] will definitely have to respond," said Philip Baggaley, an airline analyst with Standard & Poor's.

"They can't stand pat. The question is, will they simply match some of these, or will they go beyond that and offer other kinds of incentives?"

A price war could prove risky to the bigger carriers, a number of which are teetering into or near bankruptcy, while the discount carriers and their low-cost structures may be better positioned to withstand a round of price cuts.

Amid the threat of lower profits fueled by fierce price competition, airline stocks lost altitude yesterday, with JetBlue falling $1.19, or 4 percent, to $25.52. Shares of American, Northwest and Continental were also down.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.