"Low-Cost Carriers Shape Fares, Service"

Saturday, October 30, 2004

Low-Cost Carriers Shape Fares, Service
By TED JACKOVICS
The Tampa (FL) Tribune
 

TAMPA - Elizabeth Ditmer is stunned to learn that her travel prospects could
be looking up, especially with a turbulent airline industry that has taken
its toll on her favorite flights.
 
``When US Airways had direct flights between Dayton [Ohio] and Tampa, the
flight time was two hours and 10 minutes,'' said Ditmer, who moved to Tampa
from Ohio three years ago. ``Now it takes a lot longer [five hours plus]
because I always have to change planes.'' 

What's more, only once in the past six months did the Internet travel site
Orbitz alert her to Tampa-Dayton deals. 

So when Ditmer recently learned that both Delta Air Lines and AirTran soon
would launch nonstop service between the two cities, she was delighted - and
more than a little surprised. 

Despite continued reports about airline bankruptcies, fuel costs and labor
issues, five airlines will add flights and new destinations at Tampa
International Airport next week. Airlines will launch another round of new
flights at Tampa International from December through February. 

Two low-cost airlines new to Tampa will begin service in the next five days:
WestJet, based in Calgary, Alberta; and Independence Air, based at
Washington Dulles International Airport. 

Tampa International continues to benefit as low-cost carriers such as
Southwest, JetBlue and AirTran continue to grow and control air fares. That
pressures legacy airlines such as Delta and US Airways into rethinking route
strategies and lowering their ticket prices. 

How long the relatively low fares will persist remains uncertain, industry
observers say, although Tampa International could remain well-positioned for
many reasons. 

Those include a balance of business and leisure travelers (42 percent to 58
percent) and a balance of passengers who originate flights here and
elsewhere (about 40 percent to 60 percent). That generally tempers the
effect of negative travel trends. 

Equally important is that Tampa enjoys service from more low-cost airlines
than larger places such as Boston. Tampa also has service by all six of the
older legacy carriers, which prospered in an earlier era of passenger flight
when the government set routes and fares. 

``When airlines rejigger their resources, they always put planes into
Florida, and people fill those seats,'' said Ed Czepiel, associate director
for research for the Northwestern University Transportation Center in
Evanston, Ill. 

``I always think of Orlando with Disney as the first place I saw a boom in
air travel, and now I have started to think of Tampa in the same way.'' 

Czepiel noted that Southwest Airlines has emerged as Tampa International's
busiest carrier, and the airline fortuitously hedged much of its fuel prices
for 2005 at $30 a barrel. 

``Southwest is insulated from rising prices, and they are the price leader
right now,'' he said. ``If they have a fare sale, everyone else attaches a
sale to that.'' 

How Tampa Gains 

The low-cost carriers deliberately keep the pressure on legacy carriers at
Tampa and elsewhere, such as the ongoing battle between Southwest and US
Airways at Philadelphia that could determine whether US Airways remains in
business. 

``The legacy carriers have to match the new guys,'' said Louis Miller, Tampa
International's director. ``They all want to serve Florida. They have got to
protect their turf.'' 

Delta is the Florida market leader, with 28 percent of the revenue share.
``The region represents nearly a quarter of Delta's domestic revenue,''
Delta spokeswoman Peggy Estes said. ``It's an important market for us.'' 

Within hours of Independence Air's announcement last month to link Tampa and
six Southeastern cities with nonstop flights (starting Wednesday) in
addition to flights to Washington Dulles, Delta announced it would fly
nonstop (starting Monday) from Tampa to five of those same cities in
Alabama, South Carolina and Tennessee. Delta also will add nonstop flights
between Tampa and Dayton and Greensboro and Raleigh, N.C, Jan. 1, going
head-to-head with AirTran and Independence Air. 

This suits officials at Tampa International, which will add five new nonstop
destinations this fall and early winter. Passengers benefit with low fares,
so low that airline executives have begun to criticize competitors publicly,
although none seem willing or able to raise fares and keep them higher. 

Independence initially offered $49 one-way fares, not including taxes and
fees, between Tampa and Columbia, S.C., and $59 one-way fares between Tampa
and its other Southeastern destinations. Since then, it has created a
Falling Fares Sale tied to a ``falling leaves, falling temperatures'' theme.
One of those flights in mid-November from Tampa to Columbia was priced at
$54 online. 

But Independence also reported a 48 percent load factor throughout its
system in September, including the Delta Connection service it provides.
That means Independence aircraft essentially flew at less than half-full
last month. 

This week, AirTran Chief Executive Joe Leonard told The Atlanta
Journal-Constitution that Independence Air was selling tickets below cost. 

``Their strategy is unsustainable,'' he said. 

Independence intends to start its new Tampa service as planned Wednesday,
although it must use smaller regional jets initially on its Washington
Dulles route because it has not received certification to operate the
132-seat Airbus A319s as quickly as it expected. 

Different challenges face Tampa's other newcomer. WestJet, whose performance
over eight years has prompted observers to compare it to a miniature version
of Southwest, is a Canadian airline selling tickets in the United States,
where it is not well known. 

WestJet will offer its best fares in Tampa as it starts up, spokeswoman
Siobhan Vinish said. For instance, WestJet's Internet site - www.westjet.com
- shows a one-way ticket from Tampa to Toronto in February for $86. 

Though Tampa International continues to do well with schedules and fares,
the volatile economy has struck all airlines and some major cities. 

In August, Southwest reduced the frequency of Texas flights between San
Antonio- Houston, Dallas-Houston and Austin-Houston. Frontier Airlines cut
schedules by 13 percent last month, and United said it would cut its seats
12 percent. US Airways and Delta will restructure their networks. 

``We know there is excess capacity, a lot of airline seats, because airlines
cannot command a premium price right now,'' Northwestern University's
Czepiel said. 

Bargain City 

Miller expects Tampa to remain a bargain for many months as airlines
continue to add smaller, more fuel-efficient regional jets for shorter
routes and continue to compete for long-distance business and leisure
travelers. 

That suits local passengers such as John Herbert and Ditmer just fine. 

``I don't think low fares will disappear, but legacy airlines might,'' said
Herbert, a retired airline executive with Scandinavian Airlines System.
``But fares might creep up to a realistic level, reflecting true wage costs
and fuel prices.'' 

Ditmer remains hopeful. 

``Since I am retired and live on a fixed income, higher fares would
definitely keep me from flying as frequently,'' she said.


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