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Airline's 2nd Increase of 1985 Due in June : People Express to Raise Fares 10%

April 11, 1985|Associated Press

NEWARK, N.J. — People Express Airlines said Wednesday that it plans to raise its fares by an average 10% in early June, its second price hike this year.

Fares on four routes will be reduced, however, and the airline also said it plans to begin serving Columbia, S.C., on May 1.

Despite the planned fare increases, the 4-year-old carrier based here said it still offers the cheapest tickets sold without restrictions. Other airlines offer lower fares to some of People Express' destinations but with advance purchase requirements and other limitations.

People Express has been trying to raise fares so as to bolster its profitability, which has come under pressure because of the airline's rapid expansion in the past year.

The expansion lifted People Express' start-up costs and lowered the percentage of its available seats that were actually filled, or its load factor. The growth also placed the airline in more direct competition with some of the nation's largest carriers, which have responded with discounts of their own.

Indeed, a month ago People Express was forced to cut its fares on transcontinental and some other routes because of price reductions by its rivals.

In last year's fourth quarter, People Express lost $9 million. For the full year its profit fell to $1.7 million from $10.4 million in 1983.

People Express has said that it also lost between $20 million and $25 million in the first two months of this year but that its loss for the full quarter will be narrower because of a projected "slight profit for March."

"The expansion has hit us. You have to get your prices in line with your costs," acknowledged People Express spokesman Russell Marchetta. "But we still have the lowest unrestricted prices around."

Has Had Lowest Margin

Alfred Norling, an airline analyst at the investment firm of Kidder, Peabody, said People Express has consistently had the lowest margin between what it charges customers and its cost of service.

"Now they are increasing the margin so they don't have to have such high load factors" and still boost earnings, he said.

People Express said that on June 5 it will raise fares to 19 of the 33 cities it serves from its Newark hub, including a $30 boost to $199 for a one-way ticket to London.

The price of a one-way flight from Newark to the California airports at San Francisco-Oakland and Los Angeles will rise to $149 from $129 during off-peak hours and to $199 from $169 in peak hours.

Full-service airlines such as United and American will undercut People Express with one-way "ultimate super-savers" to those destinations for as low as $139, but those fares carry restrictions.

People Express' fare cuts to four cities appeared designed to compete with specific rivals.

On Saturday, the fare from Newark to Greensboro, N.C., and Norfolk, Va., will drop from $50 peak and $30 off-peak to $29 for every seat, every flight, People Express said.

Piedmont Airlines is a main competitor on those routes and is offering fares as low as $29 to Greensboro and $35 to Norfolk.

People Express also plans to cut fares from Newark to Denver and Houston, where Continental Airlines is a chief competitor, from $89 off-peak and $109 peak to $69 for every seat.

There will be no increase in fares to Dulles Airport in Washington; Baltimore; Hartford, Conn.; Boston; Rochester, Syracuse and Buffalo, N.Y., and Portland, Me.

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