For Price of a Dinner, You Can Fly to Orlando or L.A.
BOSTON — Airfare wars are back - for now.
Major airlines have dropped the cost of flying in parts of the United States to $25 - the lowest some analysts can remember in modern times.
No-frills carrier Southwest Airlines initiated the latest round by offering the one-way fare on many routes to celebrate its 25th anniversary.
But United and TWA quickly matched the rate, and other carriers are expected to follow soon in what is turning out to be a 747-sized battle for late-summer customers.
But don't pack your suitcases just yet. Many of the fares have restrictions, and over the long term analysts expect ticket prices to rise.
One reason is some of the subtle shifts that have occurred since ValuJet Airlines, one of the industry's premier bargain-basement price setters, was shut down.
While ValuJet's planes sit in the hangar - as the company revamps its operations to comply with the conditions set out by the Federal Aviation Administration - Delta and USAir have grabbed significant parts of its market share.
Both Delta and USAir reported record load levels in June as passengers who would have flown ValuJet chose them, according to the Air Transport Association, a trade group that represents the major carriers. As travelers head for the Olympics in Atlanta this month, Delta and USAir are expected to pick up even more business.
Moreover, even if ValuJet makes it back, many analysts expect its fares to be higher than before, given the restrictions it will have to operate under. One analyst says it will be, in effect, a "ward of the FAA."
"It will be harder for ValuJet to compete with its head-to-head competitors the second time around than it was when it was an upstart," says Aaron Gellman, director of the Transportation Center at Northwestern University in Chicago.
In addition, the FAA's increased scrutiny of low-fare carriers in the wake of the May 11 ValuJet crash has caused other start-ups, such as Kiwi Airlines, to temporarily halt some operations - giving major carriers an even bigger chunk of the market.
USAir, which flies some of the same routes as ValuJet, raised fares after the shutdown, but lowered them almost immediately. Delta has offered discounts on leisure fares in the same markets that ValuJet served. Other major carriers say they considered raising fares, but decided to wait.
"You cannot take this behavior in the very short run as an indicator of what airlines will do," says Arnold Barnett, a statistician at Massachusetts Institute of Technology in Cambridge, Mass., who studies airlines.
Major carriers may be biding their time before raising fares, waiting to see if the FAA allows ValuJet back in the air. "There were murmurings that major carriers didn't exactly know what to do when ValuJet went down," Dr. Barnett says. "Some wanted to raise fares, but others said you're going to create a wellspring of sympathy for its return."
ValuJet filed an initial plan to return to service last week and hopes to be back in the air the first week of August. The FAA grounded ValuJet June 17, following an intensive 30-day inspection after the crash in the Florida Everglades that killed all 110 on board. The inspection found a number of problems with the carrier, mainly in maintenance and training.
In the meantime, the tension between the low-cost airlines and the major carriers continues, with Southwest leading the price insurgency this time around.
Southwest's $25 fares apply to all the airline's nonstop routes for travel between Aug. 19 to Oct. 31. They are based on one-way travel and require only a one-day advance purchase. United, meanwhile, set cut-rate fares on four routes. TWA announced $50 round-trip fares on 12 routes.
The price competition that resulted from no-frills carriers has forced major airlines to focus more on cost control. "Low-fare carriers forced major carriers to offer their services with less skills," says Dr. Gellman. Delta has cut its costs by some $1.6 billion over the past two years. American, Northwest, United, and USAir have all reduced operating costs during that time.