A few weeks ago, American Airlines triggered an air-fare war by slashing special fares up to 70 percent below coach rates. United immediately said it would offer the new rates on all its routes, and TWA said it would match most of the fare reductions.
Needless to say, now is a great time for vacation travelers to fly.
One of the reasons for the lowered rates is that, traditionally, the period between January and April is the leanest for airlines. They need to fill empty seats and generate cash flow.
But another reason may be the growing number of discount airline operators. People Express, Tower Air, Continental and a host of other, smaller upstart operators have appeared on the airline scene in the past few years.
Deregulation has apparently had the net effect of opening the floodgates to airline entrepeneurs who think they can fly you cheaper to more places at a lower cost to them.
In the last two years, it's become difficult, if not impossible, to tell the players without a daily scorecard. So many new carriers have begun operations that airline schedule books have grown noticeably fatter and airports have become more crowded.
However, the statistics of airline failures since deregulation are staggering. Since 1978, 120 airlines have closed or filed for bankruptcy protection.
Pacific East Air, Pacific Express and Hawaii Express are just three of the West Coast carriers that did not succeed. In each case, they entered a highly competitive market and cut their fares to ridiculously low levels to attract passengers.
But in each case the major carriers in those markets matched those fares. Of course, it was impossible for any of the airlines involved to make a profit with the depressed fares.
But the big airlines matched the low fares because of a unique and, at first glance, absurd pricing philosophy. They were confident that they could lose money over a longer period of time than the newcomers. They were right.
In fact, at the time Hawaii Express went under in late 1983, the airline was carrying nearly full loads but losing substantial amounts of money.
One of the first signs of continuing airline trouble came when some of the carriers tried to sell their planes. Last October, Capitol Airlines, whose fleet had included 13 DC-8's and an A300 Airbus, quietly returned the airbus and sold four of its DC-8's. Then Capitol suddenly canceled its Los Angeles-Chicago-New York service. A few days later, the airline was out of business.
When Braniff declared bankruptcy in 1982, Air One -- the all-727, all-first-class, St. Louis-based airline -- purchased Braniff's leather seats, china, glassware, silverware and wine. The airline flew its first planes on April 1, 1983, and offered luxury flying at coach prices. "We've put style back into the airlines," said company chief executive Mark Morris. "It will catch on."
Morris was wrong. TWA competed by matching the service at lower fares. Last fall, Air One had a few of its planes seized on the ground in North Carolina for nonpayment of maintenance fees. A few weeks later, it succumbed.
Five-month-old Connectair, a commuter airline based in Santa Barbara, filed for bankruptcy on Oct. 11 last year. "Costs were well in line," said president Brian Campbell, "but we needed more capital and a couple more airplanes. We ran out of cash before we could get the aircraft."
Then there's the case of Northeastern International, the low-cost carrier based in Florida. Since its start in May 1982, the airline had grown rapidly. Last summer its planes flew 73 percent full, and Northeastern even applied to fly the Miami-Panama City route. "We're on the precipice of being consistently profitable," said Stephen Quinto, the airline's president and chief executive officer.
But by November, Northeastern started falling off the precipice. It announced it was temporarily laying off 100 employes and cut back its flight schedule from 62 to 50 flights a day. The airline, suffering from a poor cash flow, tried to explain that the move was a "seasonal adjustment plan," but then filed for bankruptcy protection shortly thereafter.
Other new carriers have disappeared before operating a single flight. They were either undercapitalized and literally could not get off the ground, or they had trouble finding the right aircraft to operate.
Suncoast Airlines, the Florida line planning to serve Chicago from St. Petersburg, and First Cabin, a new entrant from St. Paul, have had trouble finding the right planes.
Not much has been heard from Zenith International Airlines, formerly known as Jet USA. The airline announced earlier this year that it planned to fly a San Jose-Chicago-Rochester route.
Other new lines -- Northern Airlines, a Detroit firm that wanted to fly low-cost trips to Cleveland and Newark, and Bicoastal Air, which offered itself as a block-seat purchase for corporations wanting to fly between Los Angeles and New York -- have disappeared from the scene entirely.
In the short run, the new carriers that are actually flying are delivering some pretty good deals for travelers. Fares become extremely attractive, new routes are often pioneered and more people are able to fly to more places.
Not surprisingly, a number of new carriers are the brainchildren of upstart former officials of major carriers, convinced that they can start low-cost, non-union airlines that can survive a one-to-one battle with the big boys in top markets -- or, in some cases, appeal to a specific segment of the travel market not now being served.
Last year, a group of former Continental Airlines pilots announced it was planning to start all-first-class 727 service (at all-coach-class prices) this year. The new carrier, called Pride Air, will fly between Los Angeles and New York, with stops in Kansas City. Other cities served will be Boston, Washington, San Francisco, San Diego and Las Vegas.
Sometimes, a new carrier competes on a route for which there is no apparent need for additional service. But then the airline makes you an offer you can't refuse.
In the competitive Los Angeles-Las Vegas market there's Pacific Interstate. The line is now running three flights a day. Officially, PIA (not to be confused with the national airline of Pakistan) is a charter carrier, but its flights are regularly scheduled. The best part of the deal, and the real reason for the line's existence, is the price: It's actually an air fare/meal package (as cheap as $49, which covers round-trip air fare and meals for a one-day excursion) in conjunction with the Riviera Hotel in Las Vegas.
The airline owns and operates just one airplane, a 727 purchased from Pan Am in 1983.
But the new air-fare war of 1985 is again threatening to turn the skies unfriendly. A number of airlines are struggling to make or maintain a small profit. Western Airlines just reported its first full-year operating profit in five years, experiencing a $67.8 million turnaround over 1983. While Pacific Southwest Airline remains unprofitable, it is hoping for some black ink by the beginning of 1986.
Other carriers are simply hoping to survive until the lucrative summer months. Braniff, America West and Muse Air -- recently rescued by a $10 million loan from a Texas sugar firm to keep its 11 jets flying -- are three carriers that are not exactly thrilled by the American Airlines fare cuts.
For the moment, travelers can benefit from the low fares. But remember, many of the fares come with advance reservation restrictions, cancellation fees and a limited supply of discount seats.
As fares continue to drop, and as they are matched by competing airlines, there is the very real possibility of more airline failures. To protect yourself against holding a worthless ticket, pay for your ticket as close to your flight date as possible, and use a credit card. Later, if the airline you planned to fly isn't ready when you are, you can dispute the charge with the credit card company.