- The Washington Times - Friday, August 23, 2002

DALLAS (AP) Southwest Airlines said yesterday it is cutting its highest-priced fare by one-fourth in a move aimed squarely at business travelers who fly on other airlines.

Southwest said the top price for a one-way, last-minute ticket on about one-third of its routes would fall immediately to $299 from $399.

American Airlines, Northwest and Delta have moved quickly to match Southwest on routes where they compete with the Dallas-based carrier.

Southwest's action is another indication that airlines are having difficulty attracting business travelers during an economic slump. Southwest's passenger count in July fell 8.5 percent from a year ago.

Corporate travelers contribute nearly half of the industry's revenue but complain of high fares for their last-minute trips.

Despite fewer passengers, Southwest has remained profitable since the September 11 terror attacks while its major rivals have posted more than $10 billion in losses in the past 18 months.

Observers said Southwest was using its position of relative strength in a battered industry to grab customers from weakened rivals.

"For the big carriers, it's suicidal to cut business fares now while they're losing so much money," said Kevin Mitchell, president of the Business Travel Coalition. "This is a gotcha move on Southwest's part."

Few Southwest customers will benefit from the lower fares. Chief Financial Officer Gary Kelly said about 35 percent of passengers pay full fares, down from the usual 40 percent, but only 1 percent pay $300 or more one way.

On longer routes affected by yesterday's announcement, Southwest serves mainly leisure travelers who pay less by purchasing tickets in advance. But the airline believes it can take customers from other carriers who are reducing flights to save money.

"We see this as a way to get a lot of business travelers interested in Southwest Airlines on long routes that don't think of us now," Mr. Kelly said.

Southwest's fare cut will apply to some of its longer routes, such as Los Angeles-West Palm Beach, Fla.; Tampa, Fla.-San Jose, Calif.; and Philadelphia-San Diego, where rivals had been charging up to $1,181 for a one-way ticket.

Southwest serves 58 U.S. cities with no-frills, no-meals service that costs less than the service of other major carriers.

Meanwhile, other carriers continued to announce cost-cutting steps.

Fort Worth-based American said yesterday it would consolidate its headquarters in Fort Worth to two buildings from 11 by early 2005. Last week, the airline said it would lay off 7,000 people by March and trim capacity more than normal this winter.

Houston-based Continental said this week it too would cut capacity, ground airplanes and charge for some services to low-fare customers.

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