Thursday, September 06, 2001

Delta's pricing reflects slump


Airline wants to woo more leisure fliers

By James Pilcher
The Cincinnati Enquirer

        Delta Air Lines' hub mentality might be cracking in Cincinnati, at least for the time being, as the Tristate's dominant carrier tries to convince travelers that it wants its fares to be fair.

        As business travel continues to slump and the airline industry's overall decline worsens, officials for the Atlanta-based carrier say they are making a renewed push to regain local leisure travelers.

INFOGRAPHIC
Comparing Delta fares with other cities
        This includes taking the unprecedented step of cutting all domestic leisure fares at Cincinnati/Northern Kentucky International Airport, Delta's second-largest hub.

        The goal is to offer fares comparable with those at surrounding cities such as Dayton, Columbus and Louisville, although initial efforts show there are still some wide disparities with cities that feature low-cost carriers.

        “We're hoping to reduce the differential and hope to make Delta the value choice as well as the convenience choice,” Delta vice president of revenue management Harlan Bennett said. “We're very sensitive now to how much fares are in line or out of line with those at perimeter cities, and from preliminary indications, we're very encouraged.”

        A Wednesday check of a 14-day, round-trip fare with a Saturday-night stay to Baltimore — which historically has seen some of the most widely varying prices among area airports — showed that Delta's local prices are getting more in line with other cities. But disparities still exist.

        The Cincinnati fare, including the discount for booking online, was $244.35, down from $365 before the cuts. From Dayton, the fare is $219.35 connecting through Cincinnati and $106.50 from Louisville connecting through Cincinnati. Louisville also offers a direct flight to Baltimore on low-cost carrier Southwest for as little as $32 one way and as high as $174 round-trip.

        “It still is an issue of supply and demand as well as competition,” Mr. Bennett said. “We're not always going to be as low as every other city in Cincinnati ... but it is more expensive to operate there with the frequency we offer, and we do offer the value of non-stop service.”

        Delta and its Erlanger-based regional subsidiary, Comair, operate 93 percent of the flights locally, and have no local low-cost competition. Earlier this year, the U.S. Department of Transportation said Cincinnati had the second-highest average fares in the nation, calling it one of the country's “pockets of pain,” referring to the airline's local reputation of taking advantage of its near monopoly.

        But in the last month, Delta has introduced three new business fares to select cities, including a seven-day advance that requires no minimum stay. The airline is struggling to regain important last-minute travelers — 40 percent of the local market — who have either looked for cheaper options or sworn off flying altogether.

        And Mr. Bennett said Delta has cut leisure fares to all domestic destinations, both on Comair and mainline Delta flights. In addition, travel from or to Cincinnati booked through the airline's Web site is either $5 or $10 off, depending on the route and fare.

        Delta reported a $90 million loss last quarter, blaming both an 89-day Comair pilots strike in the spring and a decrease in traffic overall.

        “Carriers such as Delta are in fact trying to recapture revenue they were historically willing to allow to spill over to low-fare carriers,” Jamie Baker, airline analyst with the Wall Street firm UBS Warburg, said, adding that the current industry slide is the worst in 25 years. “This would include low-cost carriers at alternate airports.”

        Mr. Bennett said Delta will not have a good idea of the response on the reductions for at least two months, and that more could be possible, “depending upon the reaction of the market. If the reaction is positive, we could do more.”

        He also said that while the main factor in the decision to reduce fares was the economy, Delta also hopes it changes its local reputation.

        “We're optimistic that the customers will see the value in this and respond,” Mr. Bennett said.

        Some local travelers said they would fly more on both business and pleasure if the cuts are as deep as Delta advertises. However, they also said it will be hard for Delta to overcome past perceptions.

        “I've been thoroughly disappointed with the so-called cuts so far,” said Joe Blanc, a Loveland systems specialist who says he flies as many as 15 times a year, and also flies his 12-year-old daughter to the area from Baltimore for visits. “Right now, I'm willing to drive an hour and a half to save a couple of hundred dollars, and I don't see that changing soon.”

        But Kevin Gunderson of Ashland, Ky., who has the choice of driving about two hours to either Cincinnati or Columbus, says lower prices here would make him travel more in general and more out of Cincinnati.

        “I would be willing to pay 10 percent more to fly out of there because of the non-stop service,” said Mr. Gunderson, who said he flies six to eight times a year. “Delta has always needed to be sensitive to the geographical price structure, and it's good to hear they're doing that. There are a lot of us out here willing to make a drive to save some money.”

       



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