United Airlines, the nation's largest airline, announced yesterday that in an effort to increase revenue it will boost most of its domestic coach fares by $2 to $70 for tickets purchased on or after Aug. 17.
In its first major restructuring of domestic fares in more than two years, United said that two-thirds of its regular coach fares and all of its Super Coach fares will climb. There will be fare increases on most flights originating in the Washington area.
United's fare increases come in the face of a net loss of $102.9 million and an operating loss of $191.9 million in the second quarter, primarily because of its 29-day pilots' strike. The airline's revenue declined 38 percent to $1.01 billion, and scheduled passenger miles fell 31 percent.
Industry analysts and airline executives speculated that United's price increases may cause other carriers to do the same.
"Anytime that a carrier the size of United does something dramatic, the other carriers follow suit," said Matt Gonring, spokesman for Northwest Airlines Inc. "If this is an across-the-board increase throughout the United system, it's likely that many of the major carriers would match these increases in markets where they compete."
"This seems to be an attempt by United to overcome its yield [profit] problems," said Nicholas J. Giuliano, airline analyst from Wood Gundy Inc. in New York. "If fares are being raised by one airline, the inclination of many other carriers would be to raise its air fares."
United's executives said that they aren't concerned the price increases will hurt the airline's competitiveness. "These are not large increases, and we don't feel this will dampen traffic growth," said Chuck Novak, spokesman for United.
The increases are part of an overall restructuring of its regular coach fares, using an approach pioneered by American Airlines in 1983. United has created 17 fare categories based upon mileage, from 50 miles and less to 2,751 miles or more. United will charge the same fare within each mileage block regardless of the routes served.
"This new fare structure will result in a more complete and equitable product offering to the consumer," said John R. Zeeman, United's executive vice president of marketing and planning.
"Since the mileage structure filing in April of 1983, which most carriers adopted, there have been numerous exceptions and adjustments to the structure to the extent the structure is no longer meaningful," Zeeman said. "Therefore, we believe it is time to overhaul the structure with broad mileage blocks to eliminate unfairness in fares."
As an example of the unfairness, Zeeman cited the difference in fares for flights between Chicago and two Florida cities, Ft. Myers and Sarasota. "It's 165 miles shorter between Chicago and Sarasota, yet it costs $44 more than to fly to Ft. Myers," he said. "This restructuring action will correct situations like this."
Under the new regular coach formula, the one-way fare from New York to Chicago will drop from $268 to $250, while the Denver to Los Angeles fare will jump from $265 to $290.
Among the new one-way fares announced by United, the one-way coach ticket from Washington to Chicago will increase from $228 to $250; the Washington to Denver fare will jump from $316 to $370; the Washington to Los Angeles ticket climbs from $457 to $490; and Washington to Boise, Idaho, increases from $430 to $460, according to Novak. Fare decreases include a one-way coach ticket from Washington to Grand Rapids, Mich., from $286 to $250.
The Super Coach fares, which are limited to specific markets, will be increased by 10 percent. The current one-way coach fare from Washington, D.C., to Seattle will rise from $230 to $250, said a United spokesman.
"Super Coach fares are essentially the root causes for declines in business fare yields in the marketplace," Zeeman said. United also will introduce a new Ultra 14 fare that will be pegged at 45 percent below the regular coach fare. To obtain this fare, travelers will have to buy a round-trip ticket 14 days before the flight or 14 days after making a reservation, whichever comes first, and meet other eligibility requirements.
In trading on the New York Stock Exchange yesterday, United Airlines stock dropped $1.50 to $54.50.