AS MERGERS AND CONSOLIDATIONS proliferate among the U.S. airlines, travelers are beginning to see widespread fare increases. Troubled People Express airline, once a pioneer in low-fare air travel, is raising fares to stay alive long enough to be taken over by Texas Air Corp.
To a limited degree, the strong effect that People Express once had on fare levels, both domestic and international, is being taken over by Presidential Airways, a year-old low-fare carrier based at Washington Dulles International airport. But Presidential Air is too small and too new to have much effect on air fares outside its own eastern U.S. market.One other airline is still pushing low fares, and it could have a strong effect. This is Continental, raised from a Chapter 11 reorganization by Frank Lorenzo. His Texas Air Corp., with the takeover of People Express, its Frontier Airlines subsidiary and Eastern Air Lines, soon will become the largest airline network in the non-communist bloc, supplanting United Air Lines as No. 1.
It is significant that the recent round of 5 percent fare increases put into effect by United in several markets and adopted by most of United's direct competitors, was not copied by Continental. When People was running Frontier, fares as low as $9 for travel to Colorado Springs, were tried. The $9 fare was a loss leader, of course, but even so fares have been rising sharply in the Denver market ever since Frontier shut down in mid-summer.
The purchase of Republic Air Lines by Northwest is expected to have a similar effect in the Minneapolis/St. Paul market, and the takeover of Ozark by TWA is expected to result in higher fares in and out of St. Louis. Will all air fares go up? No, because the big airlines like United discovered in their fare fights with People and Continental that restricted discount fares not only served to help counter competitive fare cuts, they also helped distribute traffic away from congested peak periods.
Thus we are likely to see a continuation of special, deep discount off-peak fares. The probability is that they will be adjusted frequently to meet changing traffic conditions. They will be hard to find, too, since the airlines are not always forthcoming with news about fare changes.
There was a time when the airlines filed fare changes a month or more in advance with the Civil Aeronautics Board, which then posted the changes and encouraged public comment. All this was swept away by airline deregulation, along with the CAB itself.
Today the airlines post their fare changes in great secrecy with a tariff- filing organization they created to fill the void left by the demise of CAB. The organization, an airline-owned clearinghouse based in Arlington, Va., processed more than 1.7 million fare changes in one recent 10-day period.
Through the miracle of modern computer technology, each of those changes was available to each subscribing airline within 24 hours of the day of filing. In most cases, each fare change is scheduled to take effect about 10 days after being filed with the Airline Tariff Publishers Co. This gives interested competitors ample time either to match the new fare or gear up to counter it.
All this is perfectly legal. In an unregulated industry, like the airlines, it is illegal for the carriers to get together and agree to set fares. But, as in the case of the auto industry, everybody plays follow-the- leader. For autos, it has traditionally been General Motors. Among airlines, at least since deregulation, United has been the leader.
Will United continue to be the leader in setting fares after Mr. Lorenzo consolidates his new airline empire? Operating through Texas Air Corp., Mr. Lorenzo will be able to offer whatever fare bargains best suits his marketing needs, utilizing Continental, People Express, Frontier, Eastern, New York Air, or any combination of these wholly owned carriers. This will certainly force United to do something more than counter with off-peak discounts.
It would seem then that despite the dramatic restructuring that is taking place among the airlines, fare wars are not entirely a thing of the past. This is good, for it will keep the spirit of competition alive, and except for a few of the bolder new carriers, like Presidential, which must compete directly with United over many of its routes, the dust-up that is likely to take place between Mr. Lorenzo's gang of five and United can only be beneficial to the traveling public.