=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2004/02/17/f= inancial0901EST0032.DTL ---------------------------------------------------------------------- Tuesday, February 17, 2004 (AP) America West to offer first class at coach prices MELANIE TROTTMAN, The Wall Street Journal (02-17) 06:01 PST (AP) -- Domestic first class may be about to get a whole lot cheaper. In a major shift, America West Airlines will add some new first-class tickets that are 50 percent to 70 percent off the carrier's standard rate. The move is likely to trigger a fresh round of price competition, as bigger airlines act to match those fares, particularly on nonstop routes where they go head to head with America West. America West, the country's eighth-largest carrier, is expected to roll out its new program, called "First Rate," today. It is betting that the cheaper fares will lure two groups of customers who are essential to boosting revenues in the first-class cabin: high-end leisure travelers who now buy discounted coach seats, and business travelers who can't justify the cost of a full-price first-class ticket. One catch with the new fares is that, unlike normal first-class tickets, they will be nonrefundable. But for some customers, the savings may be worth the inconvenience. One-way fares between New York and Los Angeles, and between Miami and Las Vegas, will now drop to $499 if the ticket is purchased at least a week in advance. That's down from America West's normal prices of more than $1,100. In short-haul markets, such as Phoenix to Los Angeles, one-way advance-purchase fares will fall to $149, from $310. The fare program reflects the growing struggle by airlines to fill their first-class cabins with paying passengers. As companies -- and families -- become more attentive to the bottom line, the best seats are increasingly being occupied by passengers using frequent-flier miles. Currently, only about 6 percent of travelers in America West's first-class cabin pay full fare. Airlines generally need to fill many times that number of seats with paying passengers to break even with first class; many carriers have consistently fallen short of that goal over the past decade. Other airlines, too, are working to reverse that trend. Just this week, Alaska Air Group's Alaska Airlines cut its highest fares in first class as well as coach. Meanwhile, some airlines have been beefing up their first-class cabins with new amenities, from flat beds to walled-off spaces. Under the new fare structure at America West, first-class travelers will have a choice between the new discounted but nonrefundable tickets, and full-fare tickets that can be changed or refunded without penalty. America West, a unit of America West Holdings Corp., is retaining the full-fare tickets because it believes there are still passengers willing to pay for that flexibility. Passengers who want to make changes on the nonrefundable tickets will have to pay a $100 fee, just as they now do with discounted coach tickets. America West has been quietly testing the new fares over the past 15 months with temporary markdowns on first-class tickets in a variety of markets. Those tickets, which were all nonrefundable, boosted the airline's revenue by $1 million to $2 million a week, the company says, though it doesn't expect the long-term financial effect to be that robust. What most surprised the airline is that half of the tickets were bought more than a week ahead of the passenger's planned departure. That, it says, indicates that a high number of leisure travelers were buying, in some cases up to 21 days in advance of travel. Sale fares to Las Vegas, Florida and Mexico were particularly popular among vacationers, says the airline, which primarily flies domestically. With the new program, America West passengers will be able to pick one of two types of nonrefundable fares in first class. An advance-purchase ticket (bought at least a week before the departure date) will be 60 percent-70 percent off the refundable fare. A ticket bought less than a week before the travel date will be discounted 50 percent-60 percent. The latter fares will be no more than $699 one-way in most longer-haul markets, and $199 on the shortest flights. "We're going to redefine what we think first class is, and first class should be affordable," says Scott Bowers, vice president of revenue management for America West. The new program isn't without risk for the airline. For one, the carrier says it won't "capacity control" the seats. In other words, if there's demand for all the first-class seats on a particular flight seven days in advance, it won't hold any for last-minute buyers. That could alienate travelers willing to pay full fare as well as elite-level frequent fliers who would get less chance to upgrade. At the same time, the airline fully expects that some of its first-class passengers now paying full freight will shift to the lower fares. It hopes to counteract that by selling more first-class tickets overall. This isn't the first time America West has shaken up airfare competition. In early 2002, it became one of the first major carriers to slash its fully refundable coach fares and eliminate restrictions on nonrefundable fares, such as the dreaded Saturday-night-stay requirement. Bigger airlines rushed to match the lower fares in certain markets, and in some cases made more seats available at the discounted prices. Despite that counterattack, America West wound up with more business traffic than it had, and boosted revenue enough to become profitable. It remains so. More recently, America West stirred the pot on several coast-to-coast routes, when it began offering nonstop service in October. Those prime business routes -- from New York to both Los Angeles and San Francisco, and from Boston to Los Angeles -- have long been dominated by larger, higher-cost airlines that have kept last-minute fares exceptionally high. Since America West entered those markets, fares have dropped by more than 50 percent as AMR Corp.'s American and UAL Corp.'s United, among other carriers, have matched some of the lower prices. ---------------------------------------------------------------------- Copyright 2004 AP