NYTimes.com Article: Southwest’s $29 Fares Jolt US Airways in Philadelphia

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Southwest’s $29 Fares Jolt US Airways in Philadelphia

February 13, 2004
 By MICHELINE MAYNARD





Beginning a heated competition for passengers in
Philadelphia, Southwest Airlines said yesterday that fares
would cost as little as $29 for a one-way ticket when it
begins service there on May 9.

US Airways, the leading carrier out of Philadelphia, which
is one of its three hubs, is countering Southwest's entry
by starting a "buy three, get one free" promotion for
customers who purchase tickets on its Web site.

Southwest, the nation's biggest low-fare carrier, announced
plans to fly from Philadelphia last October, with 14 daily
flights to Providence, R.I.; Chicago; Phoenix; Las Vegas;
and Orlando and Tampa, Fla. Southwest will serve another 31
cities through connecting flights at those airports.
Southwest said its cheapest fares from Philadelphia,
purchased 14 days in advance, would range from $29 one-way
to Providence, to $99 one-way to Midway Airport in Chicago.
Tickets went on sale yesterday.

The move by Southwest jolted US Airways, which is the
dominant carrier on five of the six routes that Southwest
plans to fly. US Airways, which emerged from bankruptcy
protection last year, is revising its restructuring plan,
in part to reflect the challenge it is facing from low-fare
airlines.

US Airways hired Morgan Stanley to find bidders for a
series of assets, including one of its hubs. Pittsburgh,
Philadelphia and Charlotte, N.C., are its hubs.

Last week, senior management met with union leaders to
begin discussions on a third set of wage and benefit cuts,
which unions are resisting.

Full-fare tickets on Southwest, purchased at the last
minute with no discount, will start at $49 one-way to
Providence, ranging up to $299 one-way to Las Vegas and
Phoenix, the maximum fare that it charges nationwide
between any two cities. The prices do not include federal
or local fees or taxes.

US Airways did not return a phone call seeking comment on
its fares, but its Web site yesterday said the cheapest
fare available to Providence on May 9 was $341 for a round
trip, the equivalent of $170.50 each way, more than five
times as much as Southwest. The Web site said the cheapest
fare to Chicago on that day was $218 for a round trip, the
equivalent of $109 each way, 10 percent more than its new
rival.

Southwest released a chart in which it said its competitors
charged up to $497 one-way, or 10 times as much for a
last-minute ticket from Philadelphia to Providence, and
$1,270 one-way to Phoenix, or four times as much as
Southwest.

It did not name US Airways, but a spokeswoman for Southwest
said the comparisons were drawn against US Airways' fares
and did not represent an average from Philadelphia. A
variety of airlines, including American and AirTran,
compete with US Airways from Philadelphia, though it has
two-thirds of the flights from there.

Last week, B. Ben Baldanza, the US Airways executive vice
president for marketing, said he did not think fares from
Philadelphia would fall significantly when Southwest
arrived, since other low-fare carriers already operate
there. But James C. Wimberly, Southwest's executive vice
president and chief of operations, disagreed.

"I think you can see from the percentages that we do expect
a dramatic decrease" in ticket prices, he said.

With Southwest showing its hand, US Airways may be forced
to match its fares on the routes where the two airlines
compete, said Darin Lee, senior managing economist with
LECG, an industry consulting group based in Cambridge,
Mass.

"They clearly have to respond. Keeping their current fare
structure in place would be suicidal," Dr. Lee said.

Mr. Wimberly also said Southwest would add new routes from
Philadelphia once it begins service there. "We would
anticipate quicker expansion than otherwise would be
expected," he said.

US Airways said it would provide a free ticket anywhere in
the United States and Canada to customers who bought three
tickets over the Internet for travel on US Airways, US
Airways Express or the US Airways shuttle. Customers will
pay applicable taxes and fees on the free ticket.

http://www.nytimes.com/2004/02/13/business/13fare.html?ex=1077681250&ei=1&en=cd17c077aaeb2f97


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