You Can Fly Across the U.S. for a C Note - TheStreet

Do you want to fly nonstop cross-country for under $100?

Now you can. Last week,

Southwest Airlines

(LUV) - Get Report

introduced a plan to offer a nonstop cross-country flight for that price this fall. Consumers have reason to cheer. By offering the discount rate, Southwest, known best for its shorter routes, is forcing rivals to drop prices, too.

On Sept. 15, Southwest will begin flying nonstop from Baltimore-Washington International Airport to Los Angeles International Airport at an introductory price of $99 one way, requiring a round-trip purchase

which would cost $198 total and a one-night stay over.

"This is a first for Southwest. They've never done a transcontinental route before," says Christopher Elliott, editor of consumer travel Web site Elliott.com. "If history is any indication, airline ticket prices are going to go down."

Indeed, before Southwest's announcement, a round-trip flight from Baltimore to Los Angeles was $412 on the major carriers, says Al Comeaux, vice president of Travelocity.com, an online travel site. Now, he says, seven carriers, including Northwest, United and US Airways, have matched the $99 one-way fare, giving consumers a wider variety of cheap nonstop flights.

Bonanza for Consumers

Consumers are reaping the benefits of low-cost carriers, such as Southwest,

JetBlue

(JBLU) - Get Report

and

ExpressJet

(XJT)

expanding their markets. When a low-cost carrier enters a new market, it typically offers a low price to attract customers, forcing other airlines to follow.

In April, a Department of Transportation report concluded that the increased presence of low-cost carriers on the East Coast caused airport traffic to surge while reducing the average ticket price. Five years ago, flights into and within the Northeast market were 57% more expensive than comparable markets nationwide, according to the DOT. Today, that premium is down to 41%.

Consider, for example, the effect low-cost carriers have had on Providence's T.F. Green Airport, 45 minutes from Boston's Logan Airport. According to the DOT, in the second quarter of 1996, nearly 500,000 people flew out of Providence, paying an average fare of $213. Five years later, Providence was handling almost three times as many passengers who paid an average fare of $155 -- $58 cheaper than in 1996.

The DOT concluded that low-cost carriers were the major factor in the Providence price slide. Indeed, during the five years studied by DOT, the market share of low-cost carriers in Providence increased from 2% to 34% while the average fare fell 27%. Over the same time span in Boston, the average fare rose 8%, while the market share of low-cost carriers slipped from 4% to 3%.

But For How Long?

Southwest's expansion into the cross-country nonstop market may be a sign of things to come, as low-cost carriers "connect the dots," increasing the number of routes they fly by linking together the airports they serve. JetBlue already flies from Washington's Dulles International to Long Beach or Oakland, Calif., for $129 to $299, one way. And Southwest recently added nonstop flights between Chicago and four cites: Seattle, Oakland, Los Angeles and San Diego.

"Southwest is not straying from its short-haul niche; we're expanding into other opportunities, like we have over the past," says Linda Rutherford, spokeswoman for Southwest. "There are hundreds of opportunities out there for us in our route system."

While Southwest refused to speculate, airline analysts believe that the company's new nonstop flight from BWI to LAX won't be its last transcontinental offering.

"This is a big shift for Southwest," says Andre Libert, director of marketing for Hartford's Bradley International Airport. "I see them continuing to offer more nonstops in longer haul markets."

And even though Southwest's fare is good only through Oct. 25, airline analysts say prices will remain low even after the $99 one-way special expires. "As the economy gets stronger, they might raise those fares to $109 or $119

one way. I'm sure they'll raise rates, but it will be far below that of major airlines," says Jim Parker, analyst at Raymond James.

How You Can Take Advantage

While low-cost carriers actively promote low fares, finding out whether bigger rivals have matched those fares is much harder. But shoppers who use the Internet will have a front-row seat to any price reductions, monitoring fare prices simply by opening an email.

A number of travel sites, including Travelocity.com and Expedia.com, offer free services that email you when fares have been reduced at airports near where you live. But beware: You won't be alerted to any changes in Southwest's fares because the company doesn't use online retailers, selling tickets only through Southwest.com.