Delta Eases Atlanta Rules - 2001-07-16

Delta Air Lines last month announced relaxed fare restrictions, specifically eliminating minimum stay requirements on one-way fares for flights between its Atlanta hub and several key destinations. The carrier said the new fares, of particular interest to late-booking business travelers, offer a "good deal in this challenging economy."

The fares not only throw a bone to frustrated and price-wary business travelers, while making it easier for corporate accounts to perform, but also directly assaults low-fare carrier AirTran, whose own Atlanta operations slowly have stolen business away from its larger rival.

Indeed, Delta left routes not served by AirTran largely untouched, indicating that rival services from the Atlanta hub may have become competitive in the challenging economic environment.

The minimum stay requirements were scrapped for 14-day, seven-day and three-day advance purchases, as well as walk-up fares. Examples of the new one-way walk-up fares from Atlanta include: $266 to New York, $256 to Dallas/Ft. Worth, $236 to Boston and $221 to Washington. Those compare with previous fares of above $700 in many cases. The new fares are for economy class only. While free of minimum stay requirements, these fares include a slew of other restrictions.

UBS Warburg financial analyst Jamie Baker said the move "represents a material change in Delta's competitive position" and could cut deeply into AirTran's revenues and profits. "With this change, Delta now matches the full breadth of AirTran's fare offerings from Atlanta, as well as connecting itineraries where no competitive nonstop service exists," he said.

Other industry observers agreed with Baker that passengers who had migrated to AirTran could be pulled back to Delta if Delta's new fares last long enough. "This will definitely pull people back from AirTran, but it remains to be seen how it will impact corporate agreements," said Carol Salcito, president of Management Alternatives in Stamford, Conn. "A number of corporate agreements already include relaxed restrictions. But the airlines have to get those seats sold and they will do everything possible to accomplish that."

Greg Moore, president of Travel Metrics in Wilmington, Del., said Delta's higher cost structure, compared with AirTran's, would make it difficult to maintain these relaxed fares. "But if you are an airline and you believe the economic situation won't turn around any time soon, then you do what Delta did," he said. Indeed, Delta president Fred Reid last month told Business Travel News that he is not banking on a recovery before 2002 (BTN, June 25).

AirTran director of sales Bill Howard said Delta's new fares are "more sizzle than steak," but also acknowledged that some passengers could be lost. "But I have talked to various corporate accounts and they say this is a non-issue," he said.

However, a few Atlanta-area travel managers contacted by BTN said Delta's move indeed will draw some of their travelers back from AirTran.

"Certainly, many will return because of Delta's affinity program and the fact that it offers better service. It's like comparing Ritz-Carlton with Days Inn," said one buyer whose company uses both carriers. "Even so, AirTran has been moving its market share along pretty well and Delta had left them alone when times were good."

AirTran responded a few days later with a fare sale of its own between Atlanta and 17 cities, offering savings of up to 35 percent. The carrier reaffirmed that its fares never require a Saturday night stay.