Passengers Win as Airlines Wage War

Airfares plummet as Virgin America and Southwest battle over a route.

Feb. 4, 2009 — -- Are you familiar with Orange County, Calif?

John Wayne used to hang his Stetson there (the airport is named for him) and there's some great shopping over at the South Coast Plaza (home to Baccarat, Balenciaga, and Bulgari) -- and need I mention The House That Mickey Built?

But at the moment, this monument to suburbia is, plain and simply, a battleground. For Orange County has been chosen as the arena for an epic contest between Virgin America and Southwest.

Yes, it's war! Or rather, a good old-fashioned airfare war. And it's not the only one. But first, let's take a look at the "Golden Orange."

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The opening salvos came from Virgin AmericaRichard Branson's mood-lit baby. Amidst massive domestic flight cutbacks, Virgin America decided to begin flights between Orange County and its headquarters in San Francisco April 30. And, as so often happens, Virgin decided to inaugurate this new route with a sale, and it's a good one -- just $59 one way.

Enter the always-scrappy Southwest. It, too, has decided to fly in and out of Orange County -- beginning May 9 -- and not surprisingly, matched Virgin's $59 fare. Then Southwest reconsidered, and upped the ante -- so now it's offering flights for a rock-bottom $49 -- just a bit over what it costs to check two bags on most airlines.

"Uh-oh," said the big boys (United and American) who used to own this route. They could see what was happening, and dropped their own fares to $59. If you're saying, "Yeah, so what?" then you have forgotten that just a year ago, these fares cost more than twice as much -- $125 one way. In comparison, $59 or $49 isn't a deal -- it's a steal.

And the winner is: you, my friends, the passengers. But as I said, it's not the only war being waged.

Southwest is staking its claim to Northwest's hub in Minneapolis -- or it is as of March 8 when the airline begins flights between Minneapolis and Chicago. The knives are out -- Southwest is slashing prices, and of course, the others are fighting back.

In this economy they have no choice. Just a few short months ago, the cheapest airfare offered by American, Northwest and United for flights between Minneapolis and Chicago was a hefty $376 roundtrip, or $188 each way. Times have changed. Southwest now lists fares for as little as $49 each way, forcing hub carriers Northwest and United to match. Net savings to you? Close to 300 bucks roundtrip.

Ever notice how so many wars seem to revolve around just a couple of gunslingers in particular?

Yes, I'm talking about these low-cost carriers: AirTran, JetBlue and Southwest, and more recently, the hybrid, Virgin America. For years these "little guys" had to fight for respect -- and routes. Not surprisingly, they got good at it, and the Goliaths of the airline industry often walk away from these encounters bruised and bloodied.

So, how to determine a winner in an airfare war? Is it last carrier standing? Not usually. Sometimes, "winning" is as simple as getting a foothold in a new route -- a chance to win over some new customers, and maybe, ultimately, make a little money. Maybe make a ton of money one day (but I don't think we'll be seeing that for a while).

But, as in all conflicts, there are casualties -- whether it's an airline taking a financial hit it can ill afford at this precarious time in our economy -- or the out-and-out death of a carrier.

It has happened. I'm thinking of two deaths in particular: one in Washington, D.C., and another in Hawaii. The victims: Independence Air and Aloha Airlines.

First, Independence: this saga began earlier in the decade when the old Atlantic Coast Airlines -- which operated feeder flights for United -- tired of the legacy carrier's shenanigans, and in 2004, morphed into a new, low-cost carrier based in D.C. called Independence Air.

Suddenly, Independence was in direct competition with United, but the new airline quickly found out that you don't poke a sleeping bear in the ribs, especially when it is in bankruptcy. United roared, and 18 months, $300 million in start-up capital, and 5,000 employees later, Independence gasped its last breath.

It should be noted that a few of the Independence jets were taken over by another upstart: Go! Airlines, based in Hawaii. Irony alert: Go! set its sights on becoming #1 in the islands and began waging a particularly vicious airfare war against both Aloha and Hawaiian Airlines -- airlines that accused Phoenix-based Mesa, the parent of Go!, of unfair competition.

This time, the upstart prevailed. Poor Aloha got the worst of it, thanks to low fares and the high price of oil, and last spring, 60-year-old Aloha succumbed to its wounds. Last we heard, Go! was thinking of changing its name -- to Aloha.

Ah, yes, war is hell. At least it is if you're one of the old lions that has to worry about young whippersnappers nipping at your heels. But, there's little you can do besides holding your nose, lowering your prices and hoping to heck that a combatant like Southwest will soon tire of the game.

Southwest? Tired of waging war? Get real. And get ready for deals -- in Orange County and soon New York -- or anywhere that catches the eye of an airline on a mission to wage airfare war.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Rick Seaney is one of the country's leading experts on airfare, giving interviews and analysis to news organizations, including ABC News, The New York Times, The Wall Street Journal, Reuters, The Associated Press and Bloomberg. His Web site offers consumers free, new-generation software, combined with expert insider tips to find the best airline ticket deal.