Costly Fare Discounts Help Prevent Airlines From Gaining Altitude

This was supposed to be the turnaround year for the nation’s biggest airlines. Fleet cutbacks and the rebounding economy left fewer empty seats. Fares should have risen.

The industry found new ways to lose money instead.

With a discount nearly every month and drastic cuts of everyday fares on the East Coast, fliers enjoyed plenty of savings and fewer restrictions.

But good news for passengers means bad news for airlines. Many carriers that failed to cut costs enough are in deeper holes.

In Trouble

TRANS WORLD AIRLINES - TWA is in the most dire circumstances. Without new deals from creditors, the airline risks exhausting its cash before spring.

TWA says that if creditor talks fail, it could revisit bankruptcy court after exiting just 14 months ago. If that fails, the airline may be forced to shut down and sell its assets.

USAIR - Hundreds of millions of dollars in losses and new competition from Continental Airlines have forced USAir to seek lower labor costs. The airline is still recovering from its fifth crash in five years and doesn’t expect bookings to recover until January.

USAir is negotiating a deal with pilots that would give employees a stake in return for pay cuts. But talks haven’t advanced and a deadline for a new contract passed in mid-December.

Recouping

CONTINENTAL - The Continental Lite no-frills effort to apply Southwest’s successes to the East Coast is still a money loser. The airline has started pulling back from the strategy and is planning to ground many of its aircraft.

Continental’s attempt last March to shift from a traditional airline to an imitator of Southwest was abrupt and caused disruptions.

AMERICAN - American continues to shrink its fleet while it seeks labor savings from unions. The company says it will continue to ground jets to save money as long as the labor talks don’t progress.

Two crashes by American’s commuter carrier, American Eagle, and restrictions on the ATR aircraft that comprise much of the Eagle fleet have raised the likelihood of another disappointing fourth quarter for American.

UNITED - Shuttle by United has been flying on the West Coast since October, irritating Southwest and prompting an effort by Southwest to retain its reputation for lower fares by offering discounts.

The airline also got a windfall at its Denver hub when Continental cut back there, leaving United as the dominant carrier.

DELTA - The third-biggest airline is looking for ways to get costs down closer to the lower-fare carriers that are flying on more Delta routes.

The cost-cutting is aimed at bringing costs down to one of the lowest among the major airlines.

Making Money

NORTHWEST - One of the few airlines without any significant competition from low-fare carriers, Northwest has shown a swift turnaround from a flirtation with bankruptcy.

A 54 percent profit gain in the summer was Northwest’s fifthstraight profitable quarter.

SOUTHWEST - The airline is still profitable, just not as much as people thought.

Southwest said recently that fare sales and its rapid growth in 1994 mean it won’t match expectations for fourth-quarter profits and would earn less relative to the yearearlier quarter.