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Air Fare War Heats Up

January 7, 2005
American Airlines, the world's largest carrier, has slashed its domestic fares by as much as 50 percent, answering and raising Delta Air Lines' introduction of simplified, lower fares.

Adding jet fuel to the fire, Southwest announced it will move into Pittsburgh, taking up slack created there by troubled US Airways' cutbacks. Southwest's entry into Pittsburgh is likely to drive down fares charged by other carriers operating there.

While it is welcome news for consumers, the escalating fare war puts severe pressure on already shaky airlines and is likely to produce a long-awaited shakeout in the airline industry. US Airways is already reeling and in danger of liquidation, United and ATA seem unable to find their way out of bankruptcy court and both Northwest and Continental are reporting growing losses.

"Everyone who sets foot on an airplane can thank Southwest for this," said ConsumerAffairs.com President James R. Hood. "Every time Southwest enters another market, fares fall on flights in and out of that market. Now the detested Saturday night restriction and sky-high walk-up fares for business travelers are becoming history, thanks again to Southwest."

"Southwest and JetBlue have proven that an airline can be profitable and still deliver good service at a fair price. It's a pretty simple formula. It's too bad it has taken so long for the dinosaurs to figure it out," he said.

American did not fully match all of Delta's moves. It cut prices but did not eliminate the Saturday night stay requirement on all routes. Also, American is retaining its $100 fee for changing reservations, a charge Delta cut to $50.

Northwest and US Airways began matching Delta's fare cuts on at least of the routes where they compete. Other carriers were said to be studying Delta's reductions, which cut fares as much as 50% on long-haul routes.

Southwest, which has grown 10% in the last year and remained profitable during the industry downturn, is the longtime leader in simple, low-cost fares with few restrictions. Discount carriers like Southwest today control more than a quarter of domestic air travel.

Southwest's move into Pittsburgh strengthens its new foothold in the East. It entered Philadelphia last year, again exploiting US Air's weakness and quickly increased traffic and drove down average fares on the routes it serves. Pittsburgh International Airport executives have long hoped for a Southwest entry. US Airways' dominance there has kept fares high and traffic low.

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