Texas International Airlines said yesterday its traffic increased 700 per cent last month on those flights on which it offered consumers half-price "peanuts" fares.
Meanwhile, the Civil Aeronautics Board which allowed TI to put the "peanuts" fares into effect Feb. 1, has concluded that the airline's fares may well be "unjust, unreasonable, unjustly discriminatory, unduly prejudicial, unduly preferential, or otherwise unlawful" and should be investigated. But it said it would allow TI to continue with its half-price experiment pending the investigation.
TI, a federally regulated carrier serving nine southern and western states had asked the CAB for permission to cut fares in half on some flights - between 7 and 10:30 a.m. and 6:30 and 8:40 p.m. on five of its major routes: Los Angeles-Albuquerque; Denver-Salt Lake City; Houston-New Orleans; Austin-Dallas Ft. Worth; and Dallas/Ft. Worth-Midland,/Odessa.
It had argued the low fares would increase its business - and profits - by generating new customers who can not now afford to fly.
It's been working, Jim O'Donnell, TI vice president for marketing, crowed yesterday. "We're convinced that large numbers of new travelers are being stimulated by the new fares and are not diverting traffic from our other flights," he said.
The flights affected on TI's 80-seat planes, which were 30 to 40 per cent full before the low fares went into effect, now carry an average of 60 passengers for a 75 per cent load factor, O'Donnell said.
Although some traffic appeared to be diverted from some of the remaining full-fare flights during the first week of "peanuts" fares, it rebounded after that and remained even, he said.
The carrier's officials are so pleased with the results that on Wednesday, they introduced additional "peanuts" fares - with savings of 50 to 74 per cent off regular fares - on seven of its routes within Texas. For those routes, TI adopted a two-tier pricing system pioneered by Southwest Airlines, a TI competitor which operates solely in Texas - one fare for week days and a cheaper fare during the evenings and on weekends. On one of TI's routes, a consumer will be able to purchase a ticket for as little as $15 for a flight that used to cost $84.
TI is studying possible expansions of "peanuts" fares outside Texas, too, O'Donnell said. One indication of public interest in the low fares, he added, was the volume of telephone calls the airline gets, while it used to average 10,000 calls a day, it now gets an average of 15,000 calls a day.
Though TI's competitors on the routes it selected for "peanuts" fares oppossed the one year experiment and had urged the CAB to turn it down, some of them have already moved to match TI's prices and others are preparing to.
In outlining its "reservations" about TI's peanuts fare, the CAB said it was concerned about the adequacy of the airline's economic justification in light of the many novel characteristics of the fares. The agency said it believed TI's estimates of its overall attainable load factors were dubious and the fares were likely to divert passengers traveling at other times of the day from TI's full-fare services and from other carriers.
But balancing its reservations "against the potentially useful data" the experiment would provide, the board decided not to suspend the fares. "We would like to see what benefits this porposal will produce based upon actual experience in the market-place," the board said.