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Low-Fare Transcon.

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Author: Bond, David1

Section: AIR TRANSPORT

Low-Fare Transcon

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 тА" 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 тА" 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 тА" New York Kennedy
BOS тА" Boston
LAX тА" Los Angeles
SFO тА" San Francisco
Source: Orbitz, Aug. 12 quotes of one-way nonstop fares for
travel Aug. 14

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By David Bond

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