"No-frills, low-cost airlines are fast gaining ground"

Sunday, August 10, 2003 

No-frills, low-cost airlines are fast gaining ground 
'Regular' airlines getting more like discounters 
By Jane Engle
The Los Angeles (CA) Times


Low-fare airlines and the majors are flying so close together that someone
should file a near-miss report. The line between no-frills and full service
is quickly blurring. Consider these changes: 

   -- This fall, JetBlue passengers will get more leg room. The upstart
discounter, which provides leather upholstery and a TV screen at every seat,
will offer two extra inches. Some American Airlines' coach customers,
meanwhile, soon will lose as much as 3 inches of room they gained three
years ago. American said it would add seats on some planes to let it offer
competitive fares. 

   -- Southwest has offered no free lunch -- or any other hot meal -- for
years. Now US Airways has stopped serving free meals in coach on most long
flights. Passengers may buy food on board or bring their own. Several other
majors are trying similar programs. 

   -- You don't have to fly a discounter to get the claustrophobic,
cattle-car experience, as cash-strapped majors cut flights to match demand
drained by terrorist attacks, recession, war jitters and the outbreak of
SARS. 

Continental and United, for instance, flew fuller than ever in June. More
than 80 percent of their seats were occupied on average, compared with fewer
than 75 percent of Southwest's. That's good news for the majors, but not so
pleasant for passengers on full or overbooked flights. 

These changes result from a seismic shift in the airline industry, as the
financially struggling majors duke it out with discounters for a dwindling
pool of travelers. It's a "major correction" similar to what periodically
shakes up the stock market, said Terry Trippler of www.cheapseats.com. Delta
Air Lines chief executive Leo Mullin, in a speech last month in Washington,
D. C., predicted a "slugfest" between traditional airlines like his and the
low- fare carriers. What makes the battle at once bruising for airlines and
perfect for penny-pinching passengers is that the Internet makes it so easy
to compare fares. 

Airlines, as a result, are forced to drop fares to the lowest common
denominator. To survive, the majors, saddled with costs too high to afford
these fares, are reducing flights and on-board service. The lean-operating,
low-fare airlines, flush with cash and hope, are "ordering planes as fast as
they can build them," Trippler said -- and adding a service perk or two. The
two sides of the industry are starting to meld. 

"It's almost at the point that when you say 'the majors,' you have to
include Southwest, JetBlue and ATA," Trippler said. Southwest, for instance,
says it's the nation's fourth-largest carrier, based on boardings last year.


Phil Roberts, vice president and managing partner of Unisys R2A, an airline
consulting company in Hayward, has taken to calling American, Delta,
Northwest and their ilk "legacy carriers," referring to their existence
before the industry was deregulated in 1978. 

He also dislikes the terms "low-fare" and "discount" carriers. It's most
often the legacy carriers who do the discounting, in his view, to match the
low fares of the "discounters." Roberts calls Southwest and similar airlines
"low-cost carriers," based on how they run the business. (To further
complicate the distinction, Southwest and ATA existed before deregulation,
albeit not in their current forms.) 

Whatever they are called, this diverse collection of low-cost carriers is
gaining quickly on the legacy airlines. While the legacy lines reduce
flights and delay plane deliveries, Southwest has added about 35 flights
since January, and JetBlue boarded 60 percent more passengers in June than
it did the previous June. 

Numbers plucked from U.S. Department of Transportation reports by Hyuk Park,
senior Unisys R2A analyst, show the change: 

Legacy airlines -- including Alaska, American, Continental, Delta,
Northwest, United and US Airways -- lost more than 15 million passengers
overall in two years, as measured by boardings in the United States (except
Alaska) in the first quarter compared with the first quarter of 2001. The
main low-cost carriers -- America West, Air Tran, ATA, Frontier, JetBlue,
Southwest and Spirit -- held their own. 

Legacy carriers handled about 63 percent of the nation's passengers in the
first quarter and the low-cost carriers about 26 percent, with regional
carriers boarding the balance. 

The low-cost airlines' ascent is even more dramatic in California, where
Southwest has long been strong, and JetBlue has blossomed from its Long
Beach base. Such carriers boarded 42 percent of customers at the state's top
10 airports in the first quarter, up from 35 percent in 2001, Park said. 

Passengers stand to gain from this development despite the pain of lost
pampering. 

"Eventually the whole industry will operate on a low-cost basis," Roberts
said, making it possible to blend bargain fares with reasonable levels of
service.


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