- The Washington Times - Wednesday, January 5, 2005

ATLANTA (AP) — Delta Air Lines’ plan to cut its most expensive fares and ax a Saturday night stay-over rule for cheaper tickets could be a boon to business travelers.

But some rivals balked at the idea and analysts warned the move could reduce the already struggling industry’s revenue as much as $3 billion a year if every carrier followed suit.

Shares of airline stocks slumped after the announcement.

Several other airlines were reviewing Delta’s plan. None immediately matched it nationwide. And two discount carriers, Southwest and AirTran, said they already offer lower fares than Delta’s new model.

One thing is certain with Delta’s decision, analysts said: The days of paying top dollar for domestic flights are numbered as major airlines try to win back business travelers from discount carriers and fight off mounting losses.

“They need briefcases on airlines to make a profit,” said Terry Trippler, an industry analyst in Minneapolis who runs an airline information Web site.

Yesterday, Delta Air Lines Inc., the nation’s third-biggest carrier, announced that it is cutting its most expensive fares by as much as 50 percent nationwide and is eliminating other restrictions in an effort to woo business travelers and other last-minute ticket buyers.

Delta said no fare would be higher than $499 one-way in coach class or $599 one-way in first class under its new program, which it advertised in newspapers in several of its key markets.

Analysts and airline officials stressed that not every ticket buyer will see a fare reduction. Leisure travelers were not likely to benefit, because they generally buy their tickets well in advance of their trips. But this would make Delta’s fare structure easier to navigate. Airline executives also said that in the short term, the program could lead to less revenue for the struggling carrier, but it could benefit Delta long-term by bringing in more customers.

“Let it be clear, this is not a fare sale,” Delta Air Lines Chief Executive Officer Gerald Grinstein said. “This is a fundamental change to our pricing structure.”

Northwest Airlines Corp., the No. 4 carrier, said the Delta fare cut would hurt industrywide revenue. Yesterday, a Northwest spokesman would not say whether the airline plans to match Delta nationwide. Though by the afternoon it and Arlington-based US Airways Group Inc. matched Delta’s fares on select nonstop routes where they compete head-to-head, according to analysts with access to published fares.

A US Airways spokesman said the carrier was already offering Delta’s new maximum one-way coach fare in 29 percent of its markets.

Discount rival AirTran Airways, based in Orlando, Fla., said it had no plans to follow Delta. The nation’s largest carrier, American Airlines, a unit of AMR Corp. of Fort Worth, Texas, and No. 2 UAL Corp., parent of United Airlines in Elk Grove Village, Ill., said they were reviewing Delta’s change. Houston-based Continental Airlines Inc. declined to comment.

“We expect a significantly hostile industry response,” JP Morgan airline analyst Jamie Baker said in a research note.

Delta’s shares sank 51 cents, or nearly 7 percent, to close at $6.80 on the New York Stock Exchange. Northwest shares fell $1.04, or 10.8 percent, to close at $8.60 on the Nasdaq Stock Market. Continental shares fell 99 cents, or 8.1 percent, to $11.21 on the NYSE, where American was off 96 cents, or 9.6 percent, to close at $9.05.

Also yesterday, Delta reiterated its plans to charge $50 instead of $100 to change tickets and said it would eliminate a Saturday night stay-over to get a cheaper fare.

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