=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/chronicle/archive/2002/07= /20/BU188762.DTL ---------------------------------------------------------------------- Saturday, July 20, 2002 (SF Chronicle) Airline price war may add to losses Chronicle Staff and News Services United Airlines, American Airlines and other major U.S. carriers have slashed fares as much as 40 percent to lure travelers, a move that may aggravate industry losses that exceeded $1.4 billion in the second quarter. US Airways Group Inc., which is trying to stave off a bankruptcy filing, started the sale Thursday on domestic and some international fares. The four largest U.S. carriers -- American, United, Delta Air Lines Inc. and Northwest Airlines Corp. -- followed suit, said Tom Parsons, chief executive officer of Bestfares.com, which monitors ticket prices. "We're seeing the airlines right now going into what we're calling panic mode." Parsons said. "They're bringing out every carrot." "They are really caught between a rock and a hard place," said Daniel Kasper, airline economist at LECG LLC, a legal and economic consulting group. "They've got a lot of capacity out there that was built up at a time when demand was higher." A round-trip flight on United between San Francisco and Los Angeles is on sale for $136, down from $154. United is the largest carrier at San Francisco International Airport, accounting for about half of the flights and passenger traffic. United's parent company on Friday reported a $341 million second-quarter loss and warned it will suffer for the remainder of the year. It was the company's eighth straight quarter of losses. "This second-quarter loss demonstrates clearly that United continues to suffer from the weak revenue environment since Sept. 11. The month-to-month improvements we've seen so far this year have stalled," said Jack Creighton, chairman and chief executive officer. The nation's No. 2 carrier lost $6.08 per share in the second quarter, compared to $6.87 per share, or $365 million, for the same period last year. Analysts surveyed by Thomson Financial/First Call had estimated the company would lose $7.13 per share. United's loss excluded a net tax of $51 million the company received und= er the Air Transportation Safety and System Stabilization Act. United officials blamed the company's troubles on the persistent lull in corporate travel and on low-cost airlines, whose cheaper ticket prices have forced the nation's largest airlines to slash their own fares to remain competitive. "Clearly (discount airlines) have a negative effect on our revenue becau= se we do match their fares and it brings down our average yields," said Jake Brace, chief financial officer. United is burning through cash at a daily rate of nearly $1 million, compared with losing $5 million a day in the first quarter. United hopes federal loan assistance will help stabilize the company. La= st month, the company asked the Air Transportation Stabilization Board to back 90 percent of a $2 billion private loan. The government made $10 billion in loan guarantees available to airlines that could meet stringent financial criteria as part of the airline bailout package approved by Congress last fall.=20 ---------------------------------------------------------------------- Copyright 2002 SF Chronicle