U.S. Airlines Slash Summer, Fall Air Fares

N E W   Y O R K, June 25, 2001 -- The top five U.S. airlines slashed air fares in domestic and international markets todayas they struggle to shore up crumbling revenues weakened by theplunge in business travel.

Atlanta-based Delta Air Lines, the nation's No. 3 aircarrier, paved the way for industry-wide discounting when itlowered summer and fall prices in most of its markets. Delta saidit would offer further discounts on purchases made through itsWeb site.

After Delta's announcement, AMR Corp.'s American Airlines,the world's largest airline, and Northwest Airlines Inc. saidthey would make matching offers.

Houston-based Continental Airlines also said it would becompetitive on its domestic and international routes, while UALCorp.'s United Airlines said it would match Delta on domestic,Asian and certain Latin American routes.

"You usually don't see so many sales in June," said ABN AMROanalyst Ray Neidl. "These seem like they have some teeth inthem," he said.

Delta did not provide details of exact discounts. But in asample fare, the airline said the round-trip sale fare betweenBoston and Los Angeles is $485 and on Delta's Web site would cost$390. A flight from Washington D.C. to Nagoya, Japan would fallfrom $720 to $576 for an online purchase.

Industry experts said the fare discounts did not differsignificantly to last year's sales, but withering businessrevenues have forced air carriers to hold sales open for longerperiods.

"The fare cuts don't change really. This year there is nobreak between the sales," said Glenn Engel, airline analyst withGoldman Sachs.

Biggest Hurt in Twenty Years

The airline industry is grappling with the sharpest revenuedeclines in two decades. Last week, several U.S. carriers warnedthey would post wider-than-expected second-quarter losses as WallStreet analysts downgraded forecasts for the industry's yearlyperformance.

With the weakening of lucrative corporate travel, U.S.carriers have begun courting leisure travelers to offset lossesthrough fare offers, experts said.

UBS Warburg, which monitors the sale offers, notes thatthrough the end of June, airlines provided 128 days of specialfare offers compared to 73 days a year earlier.

"If demand was strong, the airlines wouldn't need to offerincremental summer discounts," said Sam Buttrick, a seniorairline industry analyst with UBS Warburg. "But this is not outof the ordinary with the exception of the 20 percent onlinediscount," he said.

Delta said customers who buy the sale fares through Delta'sWeb site will also get as much as an additional 20 percentdiscount off each round-trip purchase. American Airlines said itwas looking at the online discount option while United said itwould match the Delta's online offer.

Hoping to cut costs, U.S. airlines are increasinglyencouraging customers to purchase online as a way to slashdistribution expenses.

"The US carriers, as a result of the use of the Internet,have lost all control of pricing of their product," said JuliusMaldutis, an analyst with CIBC World Markets.

"They are now trying to win back some business travelers withfare cuts, I think it's doomed to failure, because the businesstravel market is highly inelastic."

After its announcement, Delta shares lost $1.93 or more than4 percent to trade at $41.61 while American Airlines stock fell$1.17 or 3.41 percent to trade at $33.19 on the New York StockExchange. UAL shares lost 33 cents to $31.91 and Continentalstock shed $1.01 to $44.19.