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Airfare wars taking off
Battle heats up as US Airways tries to cool competition
Wednesday, January 05, 2005

Airline fare wars -- brought on to spur travel to warmer climes in the cold winter months -- are heating up at the worst possible moment for US Airways.


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Confronting a barrage of discounted fares by low-cost carriers Southwest Airlines and JetBlue Airways, the nation's seventh-largest airline yesterday fired back with some fare cuts of its own, announcing one-way fares as low as $49 to Florida and the Caribbean. The move also came as competitors AirTran Airways and Independence Air unveiled winter fare discounts, and as Delta Air Lines is readying systemwide price cuts.

The cheap fares are good for travelers hoping to escape the chill of winter, but hardly are good for money-losing US Airways, which must lower costs and boost revenues if it hopes to survive its second trip through bankruptcy court.

But the airline may have no other choice. "They have to do it," said Tom Parsons, chief executive of Bestfares.com. "They have to match the competition."

US Airways spokeswoman Amy Kudwa characterized the sale -- which connects cities in the Northeast to such places as Miami and Fort Lauderdale, Fla.; Panama City, Panama; Kingston, Jamaica; San Juan, Puerto Rico; and San Salvador, El Salvador -- as a traditional maneuver to fill seats during the slowest travel season of the year.

Tickets must be purchased no later than Jan. 10 or Jan. 17, and travel must be completed by Feb. 16, Feb. 24 or April 28, depending on the location.

"This is the time of the year we see passengers who want to go to warm, sunny destinations," Kudwa said.

Rival carriers, though, may view the winter months as an opportunity to attack a weakened competitor coming off a Christmas weekend fiasco in Philadelphia that stranded thousands of passengers, left 10,000 bags of luggage unclaimed, and alienated many fliers.

  

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Concessionary talks continued last night between US Airways and two separate bargaining units of the International Association of Machinists and Aerospace Workers. If the two sides do not reach a consensual pact, a bankruptcy judge could cancel the IAM's contracts tomorrow, allowing the airline to impose pay and benefits of its choosing on 9,000 mechanics and baggage handlers. The company has asked for the authority to outsource thousands of jobs.

 
 
The other airlines "smell blood in the water," said local airline analyst Bill Lauer.

US Airways, seeking to put the Christmas crisis behind it, claims that bookings in January are ahead of last year's pace. But the holiday problems could affect business going forward, according to travel agents, who say customers are concerned that the airline may not be strong enough to survive further turmoil.

For travelers heading south, US Airways is doing its best to remain an attractive option. A flight from Pittsburgh to San Juan now costs $299 round trip, compared with $587 previously, according to Bestfares.com. Pittsburgh to St. Martin costs $419, compared with $600 previously, Parsons said.

While in bankruptcy, US Airways has been experimenting with a simpler, cheaper fare structure in certain cities, such as Philadelphia and Washington, D.C. The so-called "GoFares" now cover 29 percent of the carrier's flights, including some out of Pittsburgh.

Delta, the nation's third-largest carrier, appears to be considering a similar program, according to Time magazine, which reported this week that the carrier intends to slash fares and eliminate unpopular discount restrictions such as a Saturday-night stay requirement.

Delta has yet to confirm the report.

But Kudwa, the US Airways spokeswoman, said the airline could only offer widespread low fares if it could lower labor costs by about $1 billion. To that end, the company has new cost-cutting pacts with all unions except the International Association of Machinists and Aerospace Workers, which represents about 9,000 baggage handlers and mechanics and is being asked to give up more than $350 million.

The IAM held talks with the company again yesterday, but time is running out. A bankruptcy judge could void the IAM's contract tomorrow absent a consensual deal with the airline.

First published on January 5, 2005 at 12:00 am
Dan Fitzpatrick can be reached at dfitzpatrick@post-gazette.com or 412-263-1752. Dow Jones News Service contributed to this report.
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