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Airlines' Latest Battle: L.A. to New York Nonstop

It's blue skies for travelers but not for the big U.S. carriers, which are locked in a fare war with aggressive rivals in the 'transcon' market

May 09, 2004|James F. Peltz | Times Staff Writer

It used to be that flying nonstop from Los Angeles to major East Coast cities meant having only a handful of airline options and forking over a bundle for a seat. But as Dennis Bonilla can tell you, that's history.

Bonilla, president of a Culver City medical education firm called Medsn Inc., flies America West, a discount carrier that elbowed into the nonstop Los Angeles-to-New York market last fall with low fares and few restrictions.

"I used to take United and American to New York," Bonilla said recently as he waited to board at Los Angeles International Airport. Then, after America West rolled out its service, "I jumped right on it." By booking 14 days in advance, he said, "it's $200 round trip."

The competition for cross-country fliers has erupted into a wide-open dogfight. Once largely the domain of the big three U.S. carriers -- AMR Corp.'s American, UAL Corp.'s United and Delta Air Lines -- the nonstop transcontinental market is flooded with offerings from aggressive rivals.

They include not only America West, a unit of America West Holdings Corp. of Phoenix, but also AirTran Airways, owned by AirTran Holdings Inc.; Alaska Airlines, part of Alaska Air Group Inc.; JetBlue Airways; Southwest Airlines; and Frontier Airlines.

In the last several months, all have added nonstop flights or jumped into the "transcon" market with cheap-fare promotions aimed at building customer loyalty. Depending on the airline, the flights are connecting the California cities of Los Angeles, San Francisco, Long Beach, San Jose and Sacramento with New York, Boston, Washington, Philadelphia, Baltimore and Atlanta on the East.

In response, American, United and Delta have added transcon flights and initiated fare cuts of their own.

"We've made the decision to stand and fight," AMR Chief Executive Gerard Arpey told analysts recently. "Those are markets we've been in forever."

The result is a boon for Californians, who are enjoying plummeting fares and a broad array of choices as the busy summer travel season approaches. Discount airlines carry more than 25% of passengers traveling coast to coast, analysts estimate, and that number is expected to keep rising.

Last May, there were about 150 daily transcon round trips from various airports, airline analyst Sam Buttrick of investment firm UBS noted in a recent report. This May, there are more than 200.

The transcon battle rages as the airline industry is slowly recovering from a deep, three-year slump that staggered carriers with billions of dollars in losses. With travel picking up from its post-Sept. 11 downturn and the economy improving, flights are being added nationwide. American, United and Delta are narrowing their losses, though United remains in Chapter 11 bankruptcy proceedings.

For all carriers, the crowded transcon market is problematic. They say their "yields," or average ticket prices, have dropped sharply in the last 12 months because of price cutting.

Even profitable airlines such as America West and AirTran concede that they are losing money on their new transcon routes. Both vow to keep flying them, however, predicting that the market eventually will shake out and that they will be among the survivors because of their low operating costs.

The bigger airlines are "trying to drive us out" by adding flights and cutting fares, but "we're not going to leave," America West Chief Executive W. Douglas Parker told analysts recently. "The efficient provider is not the one going away."

Robert Fornaro, AirTran's president and chief operating officer, said the airline expected that it wouldn't make money on its Los Angeles-to-Atlanta route for two years. Still, he said, AirTran can afford to be patient.

"As long as you have a profitable base" of business, Fornaro said, "you can compete and take what the other guys throw at you."

And right now that means old-fashioned fare wars.

JetBlue is offering $99 one-way fares from its West Coast base in Long Beach to New York, Washington and Boston. United is selling $99 one-way fares through Monday to promote its new service between Sacramento and Washington/Dulles starting June 3. Alaska Airlines, which is launching service from LAX to Washington's Reagan National Airport on June 7, has an introductory one-way fare of $89 through June 30. All carry various restrictions.

"It's really cheap," said Cindy Bailey of Calabasas, another traveler who was waiting for America West's flight from LAX to New York. In addition to the price, she likes the flight's early-morning departure and nonstop service. "Usually you don't get all three" of those features, she said.

As for business fliers like Bonilla, they are no longer willing to pay walk-up transcon fares of $1,000 or more. He and other road warriors are mimicking leisure travelers by booking further in advance and scouring the Internet to lock in lower rates.

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