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Texas Air Hopes to Keep Edge by Not Hiking Fares

September 01, 1987|From Reuters

NEW YORK — Texas Air Corp., the largest U.S. air carrier and the industry pacesetter on fares, said Monday it would not join other airlines in systemwide fare increases and that instead it would reduce some fares.

"While these types of changes may well make sense a little later in the fall, we believe it may be premature at the outset of the off-peak period we are about to enter," the company said in a statement.

Analysts said the tug-of-war over fares would probably be won by Texas Air, meaning good news for travelers, but they said the longer-term outlook for fares is one of confusion.

"What this means, net, is there's a slippage in fares," said Julius Maldutis of Salomon Bros. Inc., a leading airline analyst.

Continental Airlines, which has the lowest fares of the major carriers and a division of Texas Air, said it would not match moves by other carriers to increase their lowest discount fares or change the restrictions on those fares.

Eastern Airlines, taken over by Texas Air last year, said it would reduce its lowest fares, called MaxSavers, an average $20 each way from Sept. 15 to Dec. 15.

Several major carriers, including No. 2 ranked United Airlines, No. 3 American Airlines, Delta Air Lines and Northwest Airlines, have recently said they were restructuring or increasing their discount fares aimed at leisure travelers.

The analysts said this leaves Texas Air able to maintain a price advantage over the other carriers.

As a result, other airlines may raise their lowest fares only on routes where they do not compete with Continental and forgo the increases, at least temporarily, on routes where they compete directly with the Houston-based carrier, analysts said.

"Continental did not go along with the restructuring of restrictions on discount fares. And their reason is a perfectly logical one," said Hans Plickert of E. F. Hutton and Co. "They said, 'Let's sit back and wait and see what happens,' based on the fact that fares have been rising."

While Continental said it would not match other carriers' increases on discount fares, it also said it was raising fares $10 to $40 on about 275 of its 4,500 routes. A Continental spokesman said the increases were in markets where fares have remained artificially low.

In recent months, airlines have been raising their discount fares. The carriers have said the increases were due to higher fuel costs, but analysts note that air fares are set not by costs but by competition with other carriers.

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