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Low-Fare Transcon.
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Author: Bond, David1
Section: AIR TRANSPORT
America West will launch nonstop service in four of the Big Three's profitable markets
America West
Airlines, which confounded much of the airline industry last year by
adopting a simplified, low-price fare structure, will challenge the
biggest network carriers this fall and winter with low-priced,
business-oriented nonstop service in what are currently high-priced
transcontinental markets.
On Oct. 26, America
West will launch service between Los Angeles International Airport and
two East Coast points, New York Kennedy and Boston. Service between JFK
and San Francisco will begin Dec. 19, and Boston-San Francisco will
follow on Mar. 1, 2004.
The carrier will
serve each market with two round trips per day using 124-seat Airbus
A319 aircraft. East-west flights will leave in the morning and the
early evening, while West Coast departures will be in the morning and
at noontime. But what is notable is the price â€" most unrestricted, or
walkup, tickets will cost $299 one-way.
Walkup customers are
generally business travelers, who often can't plan trips far enough in
advance to take advantage of lower but restricted fares. American,
United and Delta serve Boston-LAX and Boston-SFO nonstop, and the Big
Three plus US Airways fly nonstop between JFK and the two West Coast
points. Their walkup fares are much higher than America West's will be,
however (see table). Other carriers, including America West, operate
one-stops in each market at lower cost.
Scott Kirby,
executive vice president of sales and marketing, said America West
expects the big carriers to match or nearly match its prices, at least
on their flights that operate at about the same times, and he predicted
"very aggressive" moves to persuade their big corporate accounts not to
defect. But with a limited number of flights using relatively small
aircraft in markets that generate high passenger volumes, America West
expects to make money.
America West will be
offering only about 7% of total capacity in the JFK-LAX market, 11% in
JFK-SFO, 16% in BOS-SFO and 18% in BOS-LAX, Kirby said. The new service
will represent only 5-6% of America West's own capacity.
A key factor in
America West's choice of markets was avoiding competitors' hub
airports. Thus, America West chose JFK over Newark, where Continental
would be carrying passengers from many eastern points, not just traffic
originating in the New York area. JFK is not a hub, so airline
competition there is head-to-head.
America West will
remain a network airline, with hubs at Phoenix and Las Vegas, but will
look for more non-hub, point-to-point opportunities in the future. The
point-to-point service will increase aircraft utilization, cutting unit
costs, executives said. Eight aircraft will be needed for the four
routes. Two will be new deliveries, but the rest will be freed up by
rescheduling service at Phoenix.
Kirby said economy
seats will sell for $299 walkup, except for service in peak periods,
which might increase the price by $100 or so. He said America West
expects to draw some passengers from comparably priced transcontinental
nonstops that serve alternative airports in the West â€" Oakland, Long
Beach, Ontario and Burbank, for example. But most of its customers will
come from the heavyweights, he added.
If America West is
successful, its new service will deal another blow to the big network
airlines' hopes to regain pricing power and increase revenues. In March
2002, only weeks after closing on a $429-million loan guaranteed 90% by
the U.S. government, the maverick carrier adopted simplified
system-wide pricing that eliminated Saturday-night-stay requirements
and reduced walkup fares.
Current One-Way Walkup Fares
JFK-LAX American $926
Delta $926
United $926
US Airways $1,240
JFK-SFO American $926
Delta $926
United $926
US Airways $1,240
BOS-LAX American $1,248
United $1,312
BOS-SFO American $1,223
United $1,286
JFK â€" New York Kennedy
BOS â€" Boston
LAX â€" Los Angeles
SFO â€" San Francisco
Source: Orbitz, Aug. 12 quotes of one-way nonstop fares for
travel Aug. 14
~~~~~~~~ By David Bond
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