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Up in the Air Over Fares

February 05, 1989

One year ago, when California was on the verge of losing its last home-based airline, veteran Sacramento writer Ed Salzman whimsically proposed that major California corporations each put up a chunk of money and create a new airline. The line would serve California airports only, and would charge business and pleasure travelers "the same fair rates without a lot of mumbo jumbo" about cancellation penalties and having to stay over a Saturday night. In a word, said Salzman, then the editor of Golden State Report, this would be the reincarnation of the old PSA, which was taken over by USAir last year.

What may have been whimsy a year ago sounds pretty good right now. While USAir, American and Delta pledged to maintain the sort of service that Californians had become used to on PSA, Air Cal and Western, there was no promise about fares. The major lines recently imposed price increases that boosted the one-way unrestricted coach fare between Los Angeles and San Francisco to $148 and between Los Angeles and Sacramento to $189.

The Los Angeles-Sacramento fare has risen in dramatic fashion, going from $79 in January, 1986, to $90 in January, 1987, $119 in January, 1988, and $189 now. That is an increase of more than 100% during a period in which the national cost-of-living index went up by barely 13%.

What is especially puzzling is why major lines that now control Sacramento-Los Angeles International Airport traffic find it necessary to charge business travelers $189 for the same one-way ticket that they can sell to the state of California for less than one-third that amount. The airlines bid for the state business on a fiscal-year basis. The charge to the state for one-way travel between Sacramento and Los Angeles has remained generally stable over the past five years while prices to business travelers have soared. PSA had the contract during fiscal 1984-87 for $47, $46 and $67. American won the contract at $49 for 1987-88.

The California Department of General Services signed a dual contract with USAir for $40 andwith United at $49 for this fiscal year to give employees a greater variety of flight times. This may have been necessary in part because there are fewer scheduled flights between Los Angeles and Sacramento than there were five years ago --13 a day in each direction now, compared with 15 in 1984. Service between Sacramento and Burbank, Orange County and Ontario airports has increased by a total of 14 a day over the same period, however. State employees will make an estimated 53,000 one-way trips between Los Angeles and Sacramento in this fiscal year ending June 30.

Most travelers on most routes qualify for discount fares by booking reservations and buying tickets well in advance, with certain restrictions. Most business travelers pay the higher unrestricted rates because they cannot plan so far ahead. This is true as well for many passengers between Southern California and Sacramento who must go to the capital to testify at legislative hearings and to attend conferences.

Airline analysts say that business travelers paying the full coach fare help subsidize vacation passengers on discount tickets. Do they then subsidize state travel at an even greater discount? Do the airlines take a loss in order to have the certain state business? What would happen if a new airline dared come in to challenge the established carriers?

With deregulation and consolidation, there now are fewer, bigger lines. They can afford to sustain losses on certain routes in order to match any challenger. California businesses are not likely to buy Salzman's idea of creating a new PSA-style upstart. They may want to ask the lines, however, why their employees must pay $189 to travel to the state capital when state workers can make the same trip for $40.

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