American Airlines made its fares out of Miami much cheaper and easier to understand on Thursday in an attempt to hold on to customers being lured away to Fort Lauderdale's airport by discount carriers.
It's a sign of the times for the struggling airline industry, in which the biggest players such as AMR Corp.'s American Airlines and Delta Air Lines Inc. face soaring fuel costs and intense competition from lower-cost carriers such as JetBlue Airways Corp., Southwest Airlines Co. and AirTran Holdings Inc.'s AirTran Airways.
American is betting that the lower ticket prices in Miami will be more than offset by the addition of new customers, resulting in a slightly positive effect on revenue.
“The customers have forced us into this action,” said Scott Nason, American Airline's vice president for revenue management. “What we're reacting to is a marketplace that is deciding that our fares out of Miami were too high, and that they were willing to drive quite a distance and go through a fair amount of trouble to get a lower fare someplace else.”
American has adopted similar, albeit less extensive, changes to its ticket-price structure for flights between Dallas and five Los Angeles area airports. Responding to similar pressures, Alaska Airlines and America West have also simplified their fares.
“It's a trend the industry's moving toward,” said Ray Neidl, an airline analyst Calyon Securities in New York.
Boon for Miami-bound travelers
Under the new price structure, which applies to all nonstop flights to or from Miami in the United States and Canada, American Airlines reduced walk-up fares for one-way coach tickets by as much as 85 percent.
On the New York-Miami route, the cheapest walk-up fare in coach will drop from $836 to $209 each way, and the same fare from Miami to Washington's Reagan National Airport will be cut from $712 to $109. The lowest walk-up fare between Miami and Dallas will fall from $910 to $240 each way and American will go from 14 pricing levels to seven. The carrier's highest fares were capped at $499, $599 and $699, depending on the destination.
The airline also eliminated its Saturday night stay requirement, lowered first-class fares, and lowered its itinerary change fee to $50—actions seemingly targeted at business travelers.
“We are losing business from Miami to Fort Lauderdale and we want that business back,” Nason said. He would not say whether similar changes should be expected in other markets.
Spirit Airlines, a low-cost carrier based in Fort Lauderdale, said it isn't worried that the changes at American will affect its business.
“Our customers, both new and old choose Spirit not only for our fares, but also for our quality of service,” said spokeswoman Loren Fisher.
Fort Lauderdale-Hollywood International Airport has led the nation in boosting airplane seats available for passengers in the past three years. That airport added 16 percent more seats from December 2000 to December 2003, helped by the concentration of low-fare carriers, according a federal report. Miami International Airport lost 13 percent of its seats over the same period.