Delta Air may cut fares up to 60%

THE BALTIMORE SUN

ATLANTA - Delta Air Lines could roll out a national version of its simplified fare experiment as soon as tomorrow in a move that will cut prices and spark more competition in the struggling industry.

Industry analysts expect Delta's changes to be similar to a plan it used in Cincinnati. It cut fares by up to 60 percent there and ditched some restrictions to try to woo customers from discounters.

"I think it's a done deal. I think it's logical," said Ray Neidl, with Calyon Securities. "They've said nothing but nice things about the experiment in Cincinnati."

Delta chief executive Gerald Grinstein recently said the "simplifares" plan boosted the airline's Cincinnati bookings by about a third. In August, Delta capped one-way coach fares at its second-largest hub airport at $499, eliminated the Saturday-night stay requirement and halved its ticket change fee, to $50.

"[Revenues at] our parking lots are up 21 percent and our concessions are up, so we know there are more people," said Ted Bushelman, spokesman for the Cincinnati airport, where Delta and its Comair regional carrier account for more than 90 percent of the traffic.

Bushelman said he believes lower fares have helped reverse the exodus of one in five Cincinnati travelers who drove to Louisville and other nearby cities to patronize discount airlines that offered cheaper fares.

Neidl expects Delta to follow pretty much the same recipe nationwide to reverse customers' migration to low-fare carriers.

The airline declined to comment yesterday on news reports that it planned to overhaul and cut fares as soon as this week.

"Delta cannot and will not discuss any future pricing," said Delta spokesman John Kennedy.

Planned for months

Some industry watchers say Delta has been planning for months to restructure its fares as part of a larger turnaround plan that includes shutting down its Dallas hub and changing half of its routes.

The carrier may have decided to move up the planned fare changes sooner than originally planned, said Terry Trippler, who runs an Internet travel site.

Customers will be disappointed unless the carrier moves within a day or two to lower fares, he said.

Delta may also be hoping for a bit of good news to blunt customers' anger over a holiday travel fiasco at its Comair subsidiary, he said.

A computer glitch led the Cincinnati regional carrier to cancel all flights on Christmas, stranding thousands of passengers.

Trippler said a fare overhaul would be good, but he predicted Delta's losses will mount unless the changes not only cap the highest fares but also eliminate the cheapest fares.

'Least you will pay'

"The average fare has got to increase," he said. "I have been telling my clients this is the least you will pay to travel over Christmas for a long, long time."

However, Neidl said Delta is betting that it will be able to lower costs and attract new passengers quickly enough to compensate for an initial dip in revenue because of lower fares.

"I think this shows that management is confident that they're going to have the sharply lower cost structure that they need," he said.

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