Staff Reporter

American Airlines' pending absorption of Reno Air has touched off a limited fare war on the busy north-south coastal routes.

Southwest Airlines recently discounted its fares on all flights within California to $78 round trip, from Aug. 16 to Sept. 30. Meanwhile, United Airlines, Delta Airlines, Northwest Airlines, America West Airlines and Alaska Airlines have announced fare reductions for selected flights from Southern California to as far north as Alaska for various time frames during the off-peak season.

In reaction to Southwest's price cut, American dropped its California fares to match.

"American is very actively trying to establish a stronger local presence, and the others are saying 'We're not just going to roll over,' " said Wido Schaefer, president and chief executive of the Travel Store, a travel agency in West L.A.

While some of these reductions are seasonal, the current wave of discounts demonstrates the importance that the carriers are placing on the California corridor, which concentrates between Los Angeles and the Bay Area.

"Capacity on the West Coast has been very steady over the years, and fares have already been lower than in the rest of the country," said Glenn Engel, an analyst with Goldman Sachs. "It is surprising to see prices going down at this point, because the trend has been for them to go up since flights have been fuller."

Because American's integration of Reno Air will not add any new capacity, Engel said, that alone is probably not the explanation for the fare reductions. Rather, by discounting their fares, Southwest and other airlines may want draw some attention away from American's expansion on a temporary basis.

"I suspect that it is a reaction to American's more active role in the regional market," said Bruce Baltin, senior vice president with PKF Consulting, a San Francisco-based hospitality-industry consulting firm. "American has been very passive on the West Coast for a long time, and they are getting a lot of attention now because of their acquisition of Reno Air."

American is the third largest carrier out of Los Angeles International Airport. Currently it accounts for 9.2 percent of the passenger volume at LAX, compared to 22.9 percent for United and 11.3 percent for Southwest. But after its integration of Reno Air, which carried 1.2 million passengers out of LAX last year, its market share will be nearly identical with that of Southwest.


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