December's airfares lowest since 1989

By John Hughes
Bloomberg News Service

WASHINGTON — Airfares fell to their lowest level in 12 years last month as carriers cut prices to lure travelers following the Sept. 11 attacks.

The average one-way fare fell 15 percent to $117.79 from December 2000, the lowest since August 1989's $117.78 and the 10th monthly decline in a row, the Air Transport Association said in its latest report. The group represents major U.S. carriers including AMR Corp.'s American Airlines, UAL Corp.'s United Airlines and Delta Air Lines Inc.

"A lot of people who flew in December purchased during the fire sale that occurred in late September and early October," John Heimlich, the group's director of economic and market research, said in an interview.

U.S. carriers had combined losses of as much as $9 billion last year, the association estimated, as companies cut travel budgets in an economic recession and as demand declined after the attacks. American, Northwest Airlines Corp., Continental Airlines Inc. and US Airways Group Inc. reported a combined $2.17 billion in fourth-quarter losses last week.

"The airlines are doing everything they possibly can to get people flying again, and this is just an outgrowth of that," said Sean Egan, an analyst with Egan-Jones Ratings Co.

The average cost of a coach seat fell 15 percent to $108.07 in December compared with the year-earlier month, while the combined average for first-class and business-class tickets dropped 14 percent to $197.16, the association said.

"I would like to think that we're stabilizing a bad situation," Heimlich said. The 15 percent drop in December airfares was the lowest percentage decline since August.

The last time carriers increased fares was in February, when ticket prices rose 0.3 percent to $149.20, the group said.