Leading Low-Cost Airline Raises Airfares

Today, Southwest Airlines
increased its sale airfares by as much as 50 percent over its previous
discounted tickets, says Tom Parsons, CEO of Bestfares.com, a travel
information web site. This is higher than the major sale fares it has
offered in the last three years. Previous sale fares on cross-country routes served by Southwest Airlines,
North America’s premier low-cost carrier, topped out at $99 each way.
Today’s sale has fares as high as $149 each way, a $100 roundtrip
difference.

“The real question is whether this is their new fare level for further
systemwide fare sales, or if it’s temporary as long as fuel remains over
$50 a barrel,” says Parsons. “Either way, consumers will pay more this
week than they did last week on the same routes.”

In recent weeks, the old traditional carriers, including American, United,
Delta, Northwest, Continental and US Airways have successfully raised
leisure airfares by $10 three times, adding $30 per roundtrip in
non-competitive markets. Today, to book a 14-day advance purchase
coast-to-coast airfare between two cities with no low-cost carrier
competition will cost $419 to $469 roundtrip.

On routes served by low-cost airlines, including Southwest, AirTran, Jet
Blue, America West, ATA and Spirit, sale fares have dropped as low as $198
roundtrip coast-to-coast.

“The days of cheap $198 coast-to-coast roundtrip airfares are not over,
but the frequency will be dramatically less as we enter 2005, especially
as jet fuel remains high,” says Parsons.

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Traditional carriers likely will take Southwest’s increase of its sale
fares as a green light to do the same.

“All the major carriers are getting beaten up on the cost of fuel, so
they’ll take advantage of this increase,” says Parsons. “The industry
reported losses exceeding $1 billion last quarter. The traditional
airlines should be dancing in the streets with this break for them.

“Overall, low-cost airlines and traditional airlines know they must get
airfares up to compensate for higher costs,” says Parsons. “Since 9/11,
low- cost carriers are the price setters. Now the question is, will other
low-cost carriers follow Southwest’s lead? Southwest very much controls
the pricing destiny for the airlines, at least on routes where they
compete.”

Bestfares.com’s Tom Parsons is one of the most sought-after travel
industry experts in the United States. Parsons regularly appears on NBC’s
Today Show, ABC’s Good Morning America, CBS’s The Early Show, CNN, Fox and
MSNBC.
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