Discount carrier AirTran Airways fired the first shot of the summer airfare wars this week, causing bigger rivals to match prices at a time when they would rather be raising them.
The sale that AirTran started — set to end at midnight heading into Friday morning — included some seats on a few short trips as cheap as $44 each way, not including taxes and fees. What really made the sale stand out was its duration, covering travel from March 19 until Nov. 16.
AirTran operates non-stop flights from Dallas/Fort Worth International Airport to its hubs in Atlanta and Orlando.
Other carriers were forced to match on routes where they compete with AirTran or risk losing many passengers to their low-cost rival. Those sales too were set to expire at midnight.
"It's very rare that we see a 200-day sale — that we get to buy that far out into the future," said Tom Parsons, CEO of travel Web site BestFares.com. "This is the first big summer airfare sale."
The length of the AirTran promotion is important for other airlines because it means they were forced to sell some seats for the peak summer travel period cheaply.
Airlines have seasonal clocks when it comes to revenue: They try to make enough money in the summer to last through the winter.
Analysts surveyed by Thomson Reuters expect five of the six largest U.S. airlines to lose money in the first quarter of 2010, with only Southwest forecast to make a profit. But in the second and third quarters, each of which includes part of the summer travel season, analysts think all six will make money.
By next winter, even with an improving economy, analysts believe at least two of the six will be losing money again.
It's impossible to know how much money airlines will leave behind by selling some of their summer seats at such cheap prices this week.
For one thing, the AirTran sale didn't include flights on Fridays and Sundays, which tend to be busy days that are popular with business travelers. AirTran offered only a few routes at the cheapest prices, such as $44 each way between Atlanta and Charlotte, N.C., and $54 each way for Boston-Baltimore and St. Louis-Milwaukee.
Airlines strictly limit the number of seats that they sell at the advertised cheapest rates.
Still, with fewer flights this summer than a couple of years ago, planes probably will be full and airlines could be getting top dollar for last-minute tickets by May or June — if they didn't sell the seat cheaply in March.
Among those matching AirTran's sale were Delta, American, United, Continental and US Airways.
Airlines have recently reported better traffic, a sign that the deep slump in travel demand is finally lifting.
"The past few weeks we have seen the first discounting for early summer as airlines want to keep up the momentum in the revenue side," says Rick Seaney, CEO of FareCompare.com.
But it's not all cheap thrills for travelers.
Seaney said there have been recent attempts to raise prices to Florida by $20 per round trip, and also to boost fares on some routes favored by low-cost carriers in the Midwest.
source: AP
