This article from NYTimes.com has been sent to you by psa188@juno.com. Low-Cost Airlines Push Forward as Their Larger Rivals Cut Back August 16, 2002 By EDWARD WONG As full-service airlines cut flights in coming months, they will create the kind of opportunity that in the past has allowed low-cost carriers to steal passengers. Economic downturns allow no-frills airlines to flex their cost advantages, and analysts say some of those carriers could scoop up abandoned slots at airports, not to mention add flights to poorly served routes. AirTran Airways, already a strong rival to US Airways and Delta Air Lines on the East Coast, is poised for such a move, analysts say. It is growing quickly, with plans to increase capacity by 20 percent from last year. In the first and second quarters, it raised its capacity - measured in a unit called available seat miles - by 12.8 percent and 23.2 percent. "We're looking for those cities that are underserved and overcharged," said Tad Hutcheson, director of marketing at AirTran. "As the other airlines are looking to scale back and cut back in capacity, we're doing just the opposite." Since the Sept. 11 attacks, AirTran has already added service to 7 cities and 24 routes. It has taken delivery of 9 Boeing 717's this year, with 11 more to come by December. The airline managed a profit of $5.1 million last quarter, though that was down 61 percent from a year earlier. Four of the country's largest full-service airlines said this week that they would reduce capacity in the next several months. American and United, which is a unit of the UAL Corporation, both said they would reduce their November schedules by 9 percent, compared with July's schedules, and Northwest announced a 13 percent cut. It is unclear how much those moves are a reflection of the usual transition to autumn, which is historically slower, and how much are a result of the economic slowdown and the decline in travel after Sept. 11. US Airways said it would cut flights and reroute some to different hubs as it operated under bankruptcy protection. It said it intended to maintain service to almost all its cities, but announced yesterday that it was dropping regional flights to Saginaw, Mich., starting Sept. 7. "Historically, the low-cost airlines have certainly taken an economic downturn to increase market share," said Susan Donofrio, an analyst at Deutsche Bank. "This was the strategy that Southwest did in the early 1990's." AirTran also used that tactic last fall, when the major carriers were still icing their bruises from the Sept. 11 attacks. It went into Baltimore- Washington International Airport in December and grabbed five gates that US Airways had used for its recently failed low-cost operation, called MetroJet. It now runs 25 flights a day from the airport. "They cut down quite a bit," Mr. Hutcheson said of US Airways. "We found clearly that that was an opportunity for us, and we took advantage of it." The nation's two most profitable airlines, Southwest Airlines and JetBlue Airways, said the planned cuts by the full-service carriers would have no immediate effect on their operations. It is too soon to tell which routes will be affected, and that limits the moves that rivals can plan. Ed Stewart, a spokesman for Southwest, said, "Long-term planning in the airline business is just two days." In 1991, Southwest snatched up gates at Midway Airport in Chicago that were abandoned by Midway Airlines when it filed for bankruptcy protection. Southwest had been running 44 flights a day from Chicago, and eventually surpassed its initial goal of 100 daily departures. JetBlue's expansion plans for the rest of the year are limited by the fact that it is taking delivery of only seven more Airbus jets, said Gareth Edmondson-Jones, a spokesman. Most of those will be based in Long Beach, Calif., with a few in Florida. JetBlue increased its second-quarter capacity by 101 percent over the period last year, and it is growing about 15 aircraft a year. "We're plane-constrained, and we recognize it," Mr. Edmondson-Jones said. "Each plane that we take, there are way more options for it than what we can do. We mull over all the options and ask which one can we make the most money at." Routes run by the full-service carriers might not meet the criteria set by the low-cost airlines. All of them said they looked for markets where there was a clear demand for low fares. AirTran and JetBlue operate out of a mix of central and secondary airports, but Southwest traditionally goes after slots only in secondary airports like Midway. In one case, JetBlue started flying a route partly because rivals had cut back. The airline had intended to start running a route from Washington to the West Coast last October, but held back because of the Sept. 11 attacks. Then in November, when it saw that full-service carriers were cutting back on service to Florida, it decided instead to add flights between Washington and Florida, Mr. Edmondson-Jones said. "The low-cost carriers are clearly in a cost position to take advantage of the situation," said Steven A. Morrison, a professor of economics at Northeastern University who studies the airline industry. "Although such carriers are hurting, they're hurting less than their network brethren." Despite their need to cut costs, the full-service airlines will not necessarily sit by and watch the low-cost carriers steal their passengers. When JetBlue moved into Long Beach, American Airlines began haggling with the city to expand its slots beyond four. It received an additional four slots, which it can hold until January, and it began advertising cheap flights between New York and Long Beach. "We know that the low-cost competitors are out there, and in these times perhaps they do have an advantage in certain marketplaces," said Marty Heires, a spokesman for American. "But we are not about to relinquish market share. We have shown in the past that we can respond." American's largest rival, United, is fighting bigger battles. Many Wall Street firms downgraded its stock and credit ratings yesterday after it said on Wednesday that it might file for bankruptcy protection, though the stock ended the day up 25 cents, at $2.70. Executives began putting together a restructuring plan to present to its unions, and the carrier sent an e-mail message to members of its frequent-flier program saying that it will honor their miles on "a safe and reliable airline." http://www.nytimes.com/2002/08/16/business/16AIR.html?ex=1030504535&ei=1&en=284ca9d88b4e4a6f HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company