United Airlines sparks fare war
Majors move to slash leisure travel prices for the fall after months of rising fares, record percentage of filled seats.
NEW YORK (CNNMoney.com) -- United Airlines has sparked a round of fare cuts for leisure travel among leading U.S. airlines this week after months of rising prices and a record percentage of seats filled across the industry.
United (Charts) cut fares on hundreds of leisure fares late Monday, and competitors such as American Airlines (Charts), Delta Air Lines (Charts), Continental (Charts) and Southwest Airlines (Charts) followed suit, according to a report from The Wall Street Journal and press releases from some of the carriers.
The airlines left the fares unchanged for the unrestricted fares that don't require advance purchase or stays, the more expensive tickets generally used by business travelers, according to the Journal.
Airfares have risen steadily this year as airlines reported filling a record percentage of seats and carriers grappled with higher fuel prices. The Air Transport Association, the industry trade group, reports that passengers paid 12.96 cents a mile through the first half of this year, up 11.3 percent from the same period last year. The June average was 13.36 cents a mile, up 12.4 percent from a year earlier.
June traffic at the nation's seven largest airlines was little changed from a year ago, as miles flown by paying passengers increased only 0.1 percent.
But a number of major carriers have cut their capacity in the last year as Delta and Northwest filed for bankruptcy court protection and U.S. Airways (Charts) was purchased out of bankruptcy by the former America West, which took the U.S. Airways name.
The available seats, therefore, fell 1.3 percent in June at the major airlines from the year-earlier level, and the percentage of seats filled rose to a record 85.8 percent at the seven largest carriers. Of those carriers, only Southwest, which reported a nearly 8 percent increase in capacity, saw the percentage of seats filled fall from year-earlier levels.
A United spokeswoman told the Journal the fare sale wasn't driven by softening sales, and that the airline routinely cuts leisure fares after the peak summer travel season. She said the sale lowers leisure fares 4 to 8 percent, while last fall the fare sale cut about 10 percent off prices.
Still, the fare war in the leisure fares could be a sign of weakening demand for tickets, according to some experts.
"It seems people are getting a little bit cranky because the prices have gotten so high," Rick Seaney, CEO of FareCompare.com, a Web site that tracks airline fares, told the newspaper.
The fall revenue outlook for the airlines is important because airlines are finally seeing profits this summer after collectively losing $42 billion from 2001 through 2005. But expectations of a slowing economy and still-rising fuel prices could quickly squeeze the airlines once again.
Related: Fly the crowded skies