- The Washington Times - Thursday, January 6, 2005

Fare cuts to attract business travelers spread through the airline industry yesterday, with American Airlines, the nation’s largest carrier, imitating Delta Air Lines’ decision to sharply reduce the price of tickets booked at the last minute.

Rivals United Airlines, US Airways, Continental Airlines and Northwest Airlines, which are also under assault by rapidly expanding low-cost carriers, took a more limited approach, matching Delta’s cuts only in some markets where they compete head-to-head.

Wall Street analysts had been expecting a more aggressive industrywide response and surmised that carriers are waiting to see whether they actually lose a sizable number of high-paying business travelers by not immediately following Delta, and now American, a unit of AMR Corp.

Fed up with the large disparity between prices for last-minute fares on large U.S. airlines and those booked farther in advance, corporate travelers have in recent years increasingly relied upon online booking, videoconferencing and budget carriers to decrease their travel spending. On shorter trips, some now drive or take public transportation to avoid the hassles associated with flying since airport security was stepped up after the September 11, 2001, terrorist attacks.

The announcement by Delta Air Lines, the No. 3 U.S. carrier, on Wednesday to overhaul its fare structure was seen as a direct response to this growing financial threat at a time when the industry is also beset with high fuel prices and bloated operating costs.

While the fare cuts, if mimicked industrywide, could reduce U.S. carriers’ annual revenue by $2 billion to $3 billion in 2005, analysts believe it is a smart long-term strategy.

“I think it will become quickly apparent that those that don’t match will be at a competitive disadvantage,” said Jim Corridore, airline analyst at Standard and Poor’s in New York. “These are your most profitable travelers and you don’t want to lose them.”

Continental Airlines Inc., Northwest Airlines Corp., UAL Corp.’s United Airlines and US Airways Group Inc., based in Arlington, made limited adjustments, copying Delta’s cheaper ticket prices in select markets where they go head-to-head.

Two discount carriers, Southwest Airlines Inc. and AirTran, said they already offer lower fares than Delta’s new model.

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