Continental Ups The Ante On Autumn Fare Sales >CAL Tuesday August 17, 5:36 PM EDT NEW YORK (Dow Jones)--As airlines begin announcing their autumn fare sales, Continental Airline Inc. (CAL) is upping the ante. The Houston carrier is offering a 10%-off coupon to any customer who finds a lower price for a given itinerary on another carrier than the fare quoted on Continental's own Web site. The deal is good for trips booked between now and Sept. 6, on travel during the last three months of the year. The deal is meant to draw customers to Continental's Web site, where the airline sometimes exclusively offers its best fares. The cheapest way for airlines to distribute tickets is on their own Internet sites, bypassing travel- agent commissions and the cost of maintaining call centers. Continental's offer also highlights the intense competition among airlines for passengers as carriers roll out their autumn fare sales. At the same time, fuel prices continue to reach record highs, squeezing airline profits and keeping many airlines in the red. In fact, Continental led a number of failed attempts earlier this year to increase fares to cover fuel prices. "I think they're nuts," said Terry Trippler, who operates an Internet site that tracks air fares. "I think Continental is an airline right now that's struggling to find direction" in its pricing. Trippler added: "Continental has never met a fare increase they didn't start or match." Earlier this year, Continental, along with other airlines, tried more than a dozen times to boost fares to cover fuel costs. One airline would announce a fare increase, and other airlines would match. But the fare increases almost always fell apart because one airline or another would refuse to go along on all fares. "During the quarter, Continental attempted four fare increases to mitigate a portion of the 29% year-over-year increases in fuel prices, but all were rescinded for competitive reasons," Continental Chief Executive Gordon Bethune said during a conference call in July. Now, those fare-increase attempts have become less frequent, and this week airlines announced a round of fare sales. AMR Corp.'s (AMR) American Airlines announced a fare sale earlier this month that included fares as low as $89 each way between Boston and Miami. That is cheaper than driving a car to Miami, considering gas and tolls. And AirTran Holdings Inc. (AAI) kicked off a 48-hour fare sale Tuesday for flights out of Philadelphia, where Southwest Airlines Co. (LUV) and Frontier Airlines Inc. (FRNT) have recently started service. Several of the fare sales this year focus on destinations with a lot of fresh low-cost competition. AirTran's lowest fare: $29 one-way nonstop to Boston. That's cheaper than taking the bus. "The domestic fare environment continues to erode with the growth of low-cost carriers, the simplification of the fare structure, and, of course, our own peer group's inability to act rationally," Continental CEO Bethune said. Continental simplified its own fare structure on some routes to compete with low-cost carriers. The airline set reduced fares for some advanced purchases and one-way walk-up fares and first-call fares. By offering set fares, the airline reduces its ability to change fares based on the amount of demand for a particular flight, a practice meant to boost revenue. Air-fare expert Trippler said consumers will benefit this autumn as airlines compete to fill the overcapacity of seats. "We've got so many people trying to fill so many seats, I think airlines panic," he said. "I think this will be the last year of really low fares." That's because airlines capacity is bound to decline, either because airline executives choose to cut capacity in order to stop losing money, or because some airlines go out of business. "Something's eventually going to happen. Eventually there has to be some rationalization of capacity, either an airline fails or rationalization of hubs, " said Independence Air Chief Executive Kerry Skeen in an interview with Dow Jones Newswires earlier this month. FLYi Inc.'s (FLYI) Independence Air began flying as a low-cost carrier this summer, and Skeen plans to beef up his network with more capacity and new destinations this autumn. Competition with Independence, which uses Washington as a hub, has prompted UAL Corp.'s (UALAQ) United to put some flights to Washington on sale. The lowest United sale fare: $49 one-way between Washington and Fort Lauderdale, Fla. When asked if his new airline is contributing to the problem of overcapacity, Independence's Skeen answered the same way that executives with other low-cost airlines have answered. "We are offering capacity at a cost basis that we think we can make money at, and that's the difference," he said. -By Elizabeth Souder, Dow Jones Newswires; 201-938-4148; elizabeth.souder@ dowjones.com Dow Jones Newswires 08-17-04 1736ET Roger EWROPS