US Airlines to Slash Airfares

October 14
6:00 AM 2016

The fare war over the Atlantic is forcing big airlines to consider reducing prices, redesigning cabins and adding restrictions to win back budget-conscious vacationers drawn to upstart, low-fare rivals.

Delta Air Lines Inc @Delta DAL 1.88% is reviewing cabin layouts, fares and the rules that come with them for international flights, its President Glen Hauenstein said on a call with media on Thursday.

The moves by the big carriers follow a summer in which budget long-haul airlines, notably Norwegian Air Shuttle ASA  NWARF -1.00%  , shook up the trans-Atlantic travel market by offering ticket prices as little as half what rivals charge.

Norwegian has said it can do this profitably because its labor costs are low and it flies some of the most fuel-efficient aircraft available.

On Thursday, Delta, the No.2 airline globally by passenger traffic shares that trans-Atlantic revenue fell 8% in the third quarter from a year ago. It attributed this in part to flights on low-cost airlines and luxury Gulf carriers like Emirates exceeding demand.

According to air travel intelligence company OAG, one-way flights on Norwegian across the Atlantic grew 44 percent to 2,916 this year, after increasing 34 percent in 2015. This includes new service between New York and Paris, a hub for Air France.

Norwegian's schedule is dwarfed by Delta's more than 22,000 trans-Atlantic flights, but the added service is undermining efforts by Delta and other legacy carriers to shrink trans-Atlantic capacity and firm up prices that have been falling.

For more than two years, the U.S. Transportation Department has yet to finalize approval of flights that Norwegian has petitioned to start under an Irish subsidiary, in part because many in the U.S. industry say it would undermine wages and working standards. Norwegian has disputed the claims. The European Commission is now seeking arbitration because of the delay.

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