=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2002/07/19/f= inancial1700EDT0317.DTL ---------------------------------------------------------------------- Friday, July 19, 2002 (AP) New round of fare cuts could signal more trouble at airlines DAVID KOENIG, AP Business Writer (07-19) 14:55 PDT DALLAS (AP) -- Despite more than $1.4 billion in second-quarter losses, much of it blam= ed on lower fares, the major U.S. airlines cut ticket prices this week in a move that could signal fear of a much longer slump in air travel. US Airways touched off the fare reductions Wednesday night. By Friday, American, United and Northwest had matched US Airways' action, and even expanded upon it in certain markets. Some of the cuts lowered prices by 40 percent or more. The sales, most of which run through September, come at a curious time f= or the airlines. This week, they reported results for the three months ended June 30, and only one -- Southwest Airlines, the nation's sixth-largest airline -- earned a profit in the second quarter. Across the industry this week, executives complained that they can't make enough money because fares are too low. The latest industry data show average fares in June were 10 percent below year ago levels. American's chief executive, Donald J. Carty, said average fares were at a 15-year low. The airlines' response? Cut fares some more. "What a weird situation. It's getting bizarre," said Bob Jones, who trac= ks air fares for the discount Web site onetravel.com. Todd Burke, a spokesman for American, the nation's largest carrier, said the airline was changing prices "as we think it's necessary. We matched US Airways ... and we expanded that sale to many other markets." It isn't as if the airlines haven't tried to raise fares. They have -- four times this year -- but all the increases failed to stick. In each case, at least one major carrier balked, figuring that higher fares would drive customers away. Airline executives fear that the usually robust summer travel season will fall short of expectations. On Thursday, Southwest's chief financial officer, Gary Kelly, said bookings for July and August continued to look disappointing and offered "no evidence that things are improving anytime soon." He said the airline industry might not return to normal before next spring. "The airlines are real worried about the fall," said Tom Parsons, chief executive of online travel-ticket seller Bestfares.com. "If Southwest said bookings were slow, you would expect that the big guys have just as many headaches." Southwest was already offering $198 round-trip fares for coast-to-coast travel. On Thursday, US Airways matched that price on several of its own coast-to-coast routes and threw in other cuts, such as $98 round-trip fares between Albany, N.Y., and Orlando, Fla., and between Buffalo and Fort Lauderdale, Fla. American cut prices on many routes, including flights to Hawaii, which h= ad not been discounted since April, Parsons said. For example, American cut its 7-day advance price between Washington, D.C., and Honolulu from $1,141 to $775, a price quickly matched by Northwest Airlines, Parsons said. He said United then weighed in with a $713 fare on Friday. The discounted fares apply to leisure fares and generally must be bought in advance. Fare watchers complained that most of the major airlines have not cut last-minute fares often paid by business travelers. The much-higher business fares, combined with the slow economy, are causing companies to cut travel or force employees to hunt for bargain fares, even if it means staying over a Saturday night on the road. Jones, the onetravel.com analyst, said the airlines have wrecked their pricing structure with too-cheap leisure fares but exorbitant business fares. "There's got to be a point where we reach some semblance of sanity, or we're going to lose carriers," he said. Stock in all the major airlines fell in trading Friday, led by United's parent, UAL Corp., which tumbled $1.48 or nearly 20 percent to $6.05, and US Airways, which fell 60 cents or 19 percent to $2.50. Shares of American's parent, AMR Corp., fell 86 cents or 7 percent, to $12.01. Southwest shares dropped 58 cents to $12.70; Continental shares dipped 51 cents to $11; Delta shares declined 83 cents to $15.72, and Northwest shares fell 19 cents to $9.69. =20 ---------------------------------------------------------------------- Copyright 2002 AP