DALLAS Southwest Airlines Co. said Wednesday it would offer elite business travelers the chance to pay higher fares to board sooner and get frequent-flier bonuses and a cocktail.
The airline hopes the new "business select" fares will raise more than $100 million next year, but Southwest might curtail growth again as it grapples with rising fuel prices.
Chief Executive Gary Kelly said Southwest, which slowed the pace at which it was adding flights in June, is considering another reduction in expansion plans that call for adding 19 planes next year.
Kelly said he didn't know how much Southwest might slow growth, which was 5.3 percent in October.
"I don't think we would go to zero growth," Kelly said. Any further reductions in flights probably won't occur until at least May, he added.
Airlines are struggling with higher fuel costs. Even though Southwest has options to buy fuel at below-market rates, rising prices are making it harder for the Dallas-based carrier to hit its goal of increasing revenue and cutting the costs by a combined $1 billion a year.
Airlines have been raising fares in recent years, but rampant discounts have resulted in fewer passengers paying full price.
In the late 1990s, about 40 percent of Southwest passengers paid full fare, but that's down to 25 percent now, Kelly said. He hopes to stop that slide and sell some seats at the new, higher "business-select" prices.
Business-select passengers will pay $10 to $30 more per flight than Southwest's current top fares, Kelly said. The airline plans to set aside about 10 percent of seats for the new category.
Kelly said Southwest didn't test the higher fares but did survey frequent travelers, and the trade-off paying more for a better shot at boarding early "is something we think customers will highly value."
Customers will have the option of paying current walk-up fares, a category called simply "business," and cheaper but more restricted fares aimed at leisure travelers.
Business travelers are generally less sensitive to price, so they often pay more than leisure travelers. Attracting business travelers is important to Southwest.
Terry Trippler, a longtime airfare watcher who runs a travel Web site, said it was a good move by Southwest.
"Business travelers will pay that additional amount to have that boarding priority," Trippler said. "It should work. It gives the business traveler something he or she never had a chance to get to the airport whenever but know they will be boarding first."In other airline news on Wednesday:
US Airways Group Inc., spurned this year in a hostile bid for Delta Air Lines Inc., said oil prices near $100 a barrel may force more mergers among U.S. carriers.
"If oil is really going to be at $100 a barrel going forward, we have to look at restructuring this business yet again," Chief Executive Officer Doug Parker said today. "Perhaps this will compel our industry to do what it has to do and move toward consolidation."With travel demand "robust," airlines will continue to charge more for tickets to help offset rising prices for jet fuel, now the biggest cost at Tempe, Arizona-based US Airways, Parker said. Major carriers have increased fares at least seven times since Sept. 1.
Delta Air Lines
Delta Air Lines Inc., the third- largest U.S. carrier, said on Wednesday that it's studying the sale of its frequent-flier program.The Atlanta-based airline hasn't made any decisions on a sale, President Edward Bastian said today. No sale would happen before 2009, Bastian added.
UAL Corp.'s United Airlines, under pressure from rising oil prices, said it may have to ground jets to cut capacity in 2008, a possible retreat from the growth forecast it issued less than three weeks ago.
"We can adjust the domestic fleet by putting planes on the ground," Chief Financial Officer Jake Brace told analysts today in New York. The world's second-largest carrier has more than 100 aircraft "that we could ground, sell, whatever we needed to" if they can't be flown profitably as fuel prices soar.
Plans to expand flying by less than 1 percent next year are under review, Brace said. He said Chicago-based United could trim capacity by not renewing some leases for Boeing Co. 737 jets, or by parking some of its own planes. United had 460 planes in its main fleet as of September.