United's fare cuts spread, fuelling risk of airline price war

A price battle between United and heavy discounters is spreading to other US carriers, threatening to derail the industry’s nascent recovery in pricing power. Competition that heated up this summer in United’s hub cities of Houston, Chicago and Newark, New Jersey, has extended to American Airlines in Dallas and to other carriers, airline executives said. Passenger revenue for each seat flown a mile, a proxy for airlines’ control over fares, had finally started rising this year after a slump triggered by a 2015 price war. While the fare cuts are good news for travelers, they risk hurting earnings throughout the industry. The pain would be particularly acute at full-service carriers, which face higher costs after boosting wages in recent years. Southwest is among the carriers that have been pulled into the fray. “There is definitely a broad-based discounting amongst certain carriers” that has expanded, said Andrew Watterson, Southwest’s chief revenue officer on Monday. “If one or two airlines go off on a price-cutting binge, other airlines go along for the ride. If one airline moves and another does not, you could lose an awful lot of volume and you’re worse off doing nothing.” American Airlines and United Continental are matching -- and sometimes undercutting -- the heavy discounts of Spirit Airlines, said Robert Fornaro, CE officer of the ultra-low-cost carrier. <br/>