U.S. airlines make deep fare cuts
American Airlines is expected on Thursday to become the second U.S. carrier to make radical changes to its fare structure, eliminating Saturday-night stay requirements and cutting last-minute fares in a bid to compete with discount airlines.
Delta Air Lines introduced similar changes Wednesday, cutting its most expensive fares by as much as 50 per cent.
It was only one of a slew of sweeping price changes by Delta, which some analysts said could cost the industry as much as $2 billion US to $3 billion US in lost sales, if other major carriers followed suit.
- FROM SEPT. 8 2004: Delta Air Lines cutting 7,000 jobs
On Thursday, shares in AMR, American's parent company, were down 26 cents at $8.79 in mid-day trading on the New York Stock Exchange. Delta shares were down 11 cents at $6.69.
Major U.S. airline stocks fell by between seven and 11 per cent Wednesday as most of the carriers followed Delta and cut some prices or changed fare conditions. American, United Airlines, Northwest Airlines Corp. and US Airways Group matched Delta on selected routes, often where they competed directly.
Two discount carriers, Southwest and AirTran, said they already offer lower fares than Delta's new model.
Airline sector making heavy losses
American spokesperson Tim Wagner confirmed Wednesday night there would be "broad changes to [American's] fares." The airline was expected to publish its rate changes Thursday with the Airline Tariff Publishing Company system.
The moves by the big airlines are a sign of increasing desperation in a sector that has been pushed to the edge of insolvency by discount competitors like Southwest and JetBlue, under-funded pension and health plans, high fuel prices and decades of slack cost management.
- FROM SEPT. 27 2004: Airlines to lose $3B to $4B US this year; high fuel costs get blame
Many of the major U.S carriers, including US Airways and United Airlines have entered into bankruptcy protection â some have come out only to go back in â as they seek to wring steep cost concessions from their employees and suppliers.
Wooing travellers back from budget airlines
Delta also eliminated its Saturday-night stay requirements and lowered last-minute fares.
It is an effort to woo back business travellers and other last-minute ticket buyers, who are increasingly flying the low-cost carriers.
Analysts and airline officials stressed that not every ticket buyer will see a fare reduction. Leisure travellers were not likely to benefit, because they generally buy their tickets well in advance of their trips.