After Hours

Airlines relaunch Internet fares

U.S. airlines are taking to the Web to get Americans back in the air, restarting e-fare programs and selling tickets at drastically reduced prices.
Written by ZDNET Editors, Contributor on
Some airlines are revving up their online ticket programs again, bringing back the popular, cheap e-fares and offering such bargains as a $100 round-trip coast-to-coast ticket and $60 round-trip flights within California--the lowest prices seen in decades.

Several airlines suspended their weekend special e-fares after the terrorist attacks two weeks ago, cutting off one of the cheapest, easiest ways to book last-minute travel. This week, many airlines including United and US Airways brought the fares back to their sites. United sent an e-mail to select customers saying it would offer e-fares on its site, but it still wasn't sending e-mail alerts as it had in the past.

Although airline representatives declined to say why they removed the e-fares, analysts said it was likely because the carriers thought it would be inappropriate to push promotions in the wake of the terrorist attacks in New York and at the Pentagon. But the airlines still gave those seats to online discount outfits, such as Hotwire and Priceline.com, making them the only place online to find last-minute flights.

Representatives at Hotwire and Priceline, which have contracts to sell the airlines' "distressed seats"--essentially tickets the airlines cannot sell through other channels--say they saw big jumps in traffic when the airlines decided to sideline their e-fares.

"Online travel remains strong and vibrant," said Henry Harteveldt, an analyst with Internet researcher Forrester Research. "The airlines are trying to figure out what demand will be and to what degree they will need to discount to bring people back. The Web will be a big part of their plans."

Las Vegas-based National Airlines is promoting fares on its Web site, with some restrictions, through a program called "Get America Flying." Some of the fares include a price of $75 to fly round-trip between Newark, N.J, and Las Vegas, and between Chicago and Los Angeles, as well as a fare of $100 to fly between Miami and San Francisco.

Southwest Airlines is offering $60 round-trip fares between Los Angeles and Oakland, Calif., and one-way fares for almost all the cities it flies to for between $34 and $89. Hotwire is advertising round-trip fares between San Francisco and Atlanta for $181, and between San Francisco and Paris for $422.

Although people are more concerned about safety, the chief executive of Orbitz--the online travel site backed by five major U.S. airlines--said he expects the industry to rebound.

"It's how long that will take is what I don't know or what most people can't predict," Orbitz CEO Jeffery Katz said.

But the rock-bottom prices may rise over time, he warned.

The airlines have already scaled back the number of flights, reducing their supply of seats. And the cost of increased security, which is helping to alleviate the fears of the public, will be passed on to customers in some form or another, Katz said.

"Somebody has to pay the cost of the increased security," Katz said. "The marketplace must carry that. Does that mean we'll all pay a portion of our tax bill for that, or will that mean a higher surcharge that we pay for in the tickets?"

Stalled takeoff
The airline industry's troubles since the terrorist attacks have clouded the once bright future of online travel.

Travelocity and Expedia, the two largest Web travel agencies, had recorded profits and said that sales were growing. Both companies' share prices were in the double-digits--something that may not have seemed out of the ordinary for many companies, but which was an achievement that few in the beleaguered e-commerce sector could boast.

But the attacks appeared to halt the sector's advance. Web travel companies saw their stocks plummet last week, as investors feared a prolonged sales slump in air travel. On the first day that trading resumed after the attacks, Priceline, Expedia and Travelocity all dropped significantly, and they've inched up only slowly since then.

The industry downturn did not spare privately held Orbitz. The company announced Monday that it had trimmed its staff by 10 percent, or 17 workers.

Few within the ranks of Web travel say the sector can continue to grow even if sales of airline tickets remain flat. Airline travel was already in a funk before the attacks, as business travelers, looking to cut costs in a shaky economy, pruned their travel budgets.

"The travel industry has been relatively flat over the last year depending on what metric you're looking at," said Greg Stanger, Expedia's chief financial officer. "But our business and, indeed, the whole sector continued to grow quarter over quarter." Expedia saw $78 million in the second quarter, compared with $37 million from the same quarter a year ago.

Contending with security
Online travel, just like the rest of the airline industry, has to contend with the U.S. government's new security requirements. The Federal Aviation Agency has already put new restrictions on electronic ticketing.

According to the FAA's Web site, "only ticketed passengers will be allowed beyond security checkpoints." Each airline will decide what kind of documentation to accept: a printout of an itinerary or ticket confirmation, or a boarding pass provided by the airlines when the passenger checks in at the ticket counter.

The days when e-ticketed passengers could waltz up to the gate, show their driver's license and be allowed to board are over. Some sort of written proof is now required, the FAA has said.

Some in Web travel believe that the government might require more changes to how airline tickets are bought, but what those changes might be remains unclear.

Meanwhile, the airline industry hopes the holidays will jump-start air travel and create another incentive to fly.

"Businesspeople can bypass travel with videoconferencing, but videoconferencing won't take the place of hugging mom and dad," said Brian Ek, a spokesman for Priceline.

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