Fare Flight

No more transcon cheapies

One of the last bargains left for inflation-battered Americans is about to disappear. Riddled by revenue losses, the airlines declared a cease-fire last week in their price war on transcontinental routes. First, Eastern revealed that beginning in January its lowest advance-purchase round-trip fare between New York and Los Angeles would soar by 70%, from $268 to $455. Soon after, American and United announced similar hikes, and TWA is expected to follow them this week.

A newcomer to the transcontinental market, Eastern started the fare fight last June by offering round trips on some flights for $198, the lowest price on a major airline in a decade. Unwilling to part with a big share of their traffic, other carriers immediately rolled back their rates. Though Eastern subsequently raised its fares somewhat, it failed to cover its costs and suffered from the rate war. After six months, its planes were flying only 30% to 40% full. In the third quarter, the carrier lost $9.6 million, in contrast to a $20 million profit in the same period of 1979.

Fierce competition has been the norm since Congress deregulated the airline industry two years ago. Discount fares like the Super Saver cut ticket prices by up to 55%. For a while, the crowds of new passengers kept earnings up, but the combination of rising fuel costs and recession sent the airlines into a downdraft. Since 1979 the price of jet fuel has jumped from 40-c- per gal. to 92-c-, while passenger traffic has slid by 3%. The major carriers, which earned a record $1.2 billion in 1978, have lost a total of $333 million so far in 1980.

The airlines are now raising ticket prices as fast as possible. In the past year the average U.S. airfare has gone up 26%. Restrictions on the discounts that remain are being tightened. To take advantage next January of the cheapest Eastern round-trip ticket between New York and San Francisco at $475, travelers will have to book their flight 30 days in advance. The regular fare: $864.

A few passengers may still find cut-rate seats next year on the four daily New York-California flights operated by World Airways and Capitol International, two small carriers that currently offer the lowest round-trip fare: $240. But though they may continue to undercut the bigger airlines, their prices will almost certainly go up sharply. World has lost $23 million this year and cannot afford to keep its fares down much longer. Capitol is watching what the other carriers do. For the moment at least, the fare skirmishing that marked the early days of deregulation will likely give way to friendly follow-the-fare-leader cooperation.

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