Tuesday, July 23, 2002

A midsummer flight's dream

Major airlines slash fares on leisure travel

By James Pilcher, jpilcher@enquirer.com
The Cincinnati Enquirer

        After five abortive attempts to raise airfares, the nation's major carriers have gone in the opposite direction — taking the rare step of making deep cuts in the cost of leisure travel in midsummer.

        The event, which began late last week and runs through Thursday, includes local market dominator Delta Air Lines. The Atlanta-based carrier has slashed fares from its hub at the Cincinnati/Northern Kentucky International Airport by as much as 40 percent for leisure travel to many markets through Oct. 1.

        Analysts see the sale, which was expanded to nationwide status by American Airlines late last week, as a way for the airline industry to drive traffic and create as much revenue as possible. Yet the discounts, which are as high as 65 percent off full prices, come at a time when airlines are suffering extensive financial losses with no end in sight.

        Delta alone reported a second-quarter loss of $186 million last week, with other major carriers such as American and United reporting nearly twice that. The industry as a whole is expected to pile up $1.3 billion in losses in the second-quarter. Officials at Delta, which employs thousands locally, warned investors not to expect much, if any, improvement in the current period.

        “They've already written off the third quarter, and are just trying to get people in the seats in some pretty ugly times,” said Tom Parsons, chief executive officer of Bestfares.com, a web site devoted to finding the lowest airfares available. “They've got people losing thousands from their 401(k) accounts, they've got business travelers continuing to stay home.... And they've got the anniversary of September 11 coming up. They're fighting all that, at the same time as they're really struggling for cash.”

        Wall Street airline analyst Jim Higgins said that the sale is another sign that the airlines are having a hard time pulling in money.

        There will be “limited near-term progress on revenues,” Mr. Higgins of Credit Suisse First Boston wrote Monday in a research note.

        For consumers, the sale means some new bargains for those willing to book 14 days in advance, stay over a Saturday night and fly during non-peak hours.

        According to Delta, a round-trip flight from Cincinnati to Orlando currently costs $170, with only a seven-day advance purchase and Saturday night stay, while it cost $278 last week with a 14-day advance purchase required before the sale. A round trip from Cincinnati to any of the New York area airports went for $220 but is now $132.

        Don Freeland, owner of the Travel Store in Forest Park, said airlines are eliminating fuel surcharges to many of the cities on sale, cutting $40-45 off many fares.

        He also pointed out that while Cincinnati fares were lowered, so were those in surrounding cities with low-cost competition, such as Louisville, Indianapolis or Dayton.

        “They've kept the differential in place, even if the prices are lower,” Mr. Freeland said.

        Mr. Parsons said that the discounts are even deeper in cities with low-cost competition, saying a group traveling together may want to consider driving to another airport to get even lower fares. A Delta flight to Chicago from Indianapolis now costs $68 with only a seven-day advance purchase, while a Delta ticket from Columbus to Orlando was $118, with seven-day advance purchase.

        He also said travelers looking for even cheaper fares also should be willing to connect out of Cincinnati, since other airlines could enact “retaliatory fares” against a hub carrier such as Delta.

        “The hub cities are always protected in some way or another,” Mr. Parsons said. “At least in Cincinnati, you have options.”


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