Legacy Airlines Get Resourceful

Beaten-down legacy airlines, tired of losing battles to low-fare competitors, are finding ways to win occasionally.

Although the six legacy carriers have lost close to $40 billion over the past five years, some are showing surprising resilience in battles with their nemeses. One encounter is shaping up in Charlotte, N.C., the biggest hub for US Airways Group(LCC Quote) unit US Airways, where low-fare carrier JetBlue Airways(JBLU Quote) plans to start service.

Another is taking place in a little-known corner of the airline industry known as "yield management," where complex software programs continuously adjust fares in response to ticket-purchasing patterns. In both cases, legacy carriers appear to be using their superior resources to their advantage.

US Airways has responded aggressively to JetBlue's plans to begin flying between Charlotte and New York's Kennedy International Airport on July 12. It has cut fares between Charlotte and New York's LaGuardia Airport, which is more convenient than Kennedy, being closer to Manhattan, and has also announced plans to start its own Charlotte-to-Kennedy service. "We're not going to let them come in and take our customers," Scott Kirby, US Airways executive vice president, said Tuesday at the airline's annual meeting in Charlotte.

But it's gone further than that.

Early this month, US Airways moved to block JetBlue's fare increase of $25 to $50 each way on the majority of its east-west advance-purchase fares. "We believe US Airways' action represents further evidence of increased legacy hostility aimed at stunting discount-carrier revenue recovery," JP Morgan airline analyst Jamie Baker wrote in a recent report. Despite the US Airways move, JetBlue did not rescind its increase.

"US Airways feels really feisty, and they are fighting a tactical battle, trying to confuse the enemy," says airline consultant Robert Mann. "They drained the pool in Charlotte before JetBlue came, taking out the high prices; then they failed to match the transcon fare increase."

< Previous

1 2

Next >