AA, NWA In Biz Fare Fight

Northwest and American airlines in the past few days have engaged in a back-and-forth fare fight that thus far has resulted in 30 percent business fare reductions in some markets for clients of certain travel agencies. The tussle began last week when American Airlines implemented an "under-the-radar" business fare cut, slashing business fares by as much as 10 percent in certain markets, according to Deutsche Bank Securities analyst Susan Donofrio. Donofrio noted that American did not publish the reduced fares in the global distribution systems, but rather distributed the discounts directly to customers of certain travel agencies. "We think it was done to gain marketshare at the expense of the others," Donofrio said. "We will see a number of different methods tried in the upcoming months as airlines attempt to react to this new business fare environment."

Northwest confirmed it retaliated against the discreet AA fare cuts by publishing matching business fare reductions on competitive routes. "We elected to match so that it would be available to all travel agencies, not just the largest few, and through both nwa.com and Northwest phone reservations," said Kurt Ebenhoch, a Northwest spokesman.

Ebenhoch added that AA matched NWA's published cut, effectively lowering business fares on certain routes by 20 percent for clients of the affected agencies. To stay competitive, Northwest added another 10 percent to its published reduction. The latest salvo, Ebenhoch said, was yet another 10 percent discount applied by AA earlier today, resulting in a 30 percent business fare cut on select routes for certain fare types for clients of those select travel agencies and a 20 percent cut for the traveling public. "We currently are evaluating our competitive response," he said.

AA spokesperson Todd Burke confirmed AA had matched NWA's published fare reduction, which chopped another 5 percent to 10 percent off business fares, depending on fare type and route, but had no comment on any additional fare actions taken today.

While business fare reductions could attract corporate travelers and drive marketshare they also may worsen the industry's weak financial state. However, three attempts to broadly raise fares this year each failed when Northwest did not match.

There was no word from other carriers on the recent AA and NWA competitive price reductions.