Though fliers have seen little relief from high fares recently, one group may be benefiting from Southwest Airlines' entry into Atlanta – last-minute business travelers.
That’s what a recent Delta Air Lines financial report suggested when it said lower fares by competitors had hurt revenue trends in the second half of May.
Analysts cited a sale by Southwest, which also operates AirTran Airways, that included lower fares for short-notice flights from Atlanta.
As in: an Atlanta-Denver walk-up fare that typically might cost $304 each way, or $608 round-trip, went for $159 each way or $318 round-trip, according to a report by J.P. Morgan analyst Jamie Baker. Southwest targeted Atlanta with "sharply lower, promotional walk-up fares," Baker wrote.
Analysts said the sale was set to run through Wednesday but more fare sales could come later.
Short-notice fares are usually significantly more expensive than flights booked further in advance. They're primarily used by business travelers headed to last-minute meetings and they can be a big source of airline profits.
Winning over Atlanta business travelers could be a challenge for Southwest, as it does not offer first-class sections or assigned seating -- service features most business fliers consider standard. AirTran offers both but its jets are being gradually converted to Southwest's all-coach, open-seating mode. Some AirTran fliers have grumbled about the change.
"The Southwest fare sale was specific to building ridership at [Southwest's] newly acquired AirTran operations," wrote Sterne Agee analyst Jeff Kauffman in a report.
It's not unusual for Southwest to run fare sales, particularly in new markets like Atlanta, where Southwest launched service in February and is gradually integrating AirTran's operations.
Airlines typically match fares, and after the Southwest fare sale took a bite into Delta's unit revenue, Delta's stock price took a beating. Its shares declined 11.6 percent on Monday to close at $10.18, before staging a slight recovery. Analysts called the sell-off of Delta shares an overreaction, saying the weaker-than-expected unit revenue does not indicate a broader industry fare war.
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