UAL Prez: Fare System Broken, AWA Move Devastating

"It might be true that the airfare structure is confusing, unfair and broken," UAL Corp. president Rono Dutta today told attendees at BTN's Corporate Travel World conference in New York. "But you need to look at where it's confusing, why it's unfair and what is broken."

In what attendees described as the most open public discussion of pricing by an airline executive in years, Dutta went on to echo other carriers in noting that America West Airlines' latest initiative could prove to be "devastating to the rest of us and speaks to the instability of the industry. If it weren't America West, someone else would have tried something."

Pricing is confusing, Dutta said, because of the different demand characteristics of airline customer segments, including leisure, unmanaged business and managed business travel. Pricing is particularly unfair to individual business travelers who do not have the negotiating leverage of managed programs, he said. "It's not because business fares are too high, but leisure fares are too low," Dutta said, calling "unfair" the growing gap between leisure and business fares. "A large part of that is the excess capacity in the industry."

As far as what is broken, Dutta said, the fare structure was designed to accommodate flexibility of choice for business travelers, but "you're still not coming. You, the managed customer, are showing signs of fatigue. You need to procreate more vigorously."

Dutta acknowledged that airfares are confusing, but doubted that widescale fare simplification is sustainable. In general, he said, the airline industry still must determine "how to construct meaningful fences."