
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, January 25, 1995                   TAG: 9501260055
SECTION: BUSINESS                    PAGE: B-6   EDITION: METRO 
SOURCE: The Washington Post
DATELINE:                                 LENGTH: Medium

NO-FRILLS AIRLINE DRAWS USAIR INTO COSTLY D.C.-FLA. FARE WAR

VALUJET AIRLINES has forced the ailing air carrier to cut prices by as much as 22 percent on some important routes.

Dirt cheap.

That's the only way to describe air fares between the Washington, D.C., area and Florida, for which the least expensive round-trip tickets can now be bought for $138 - the lowest in at least five years.

Washingtonians can thank a vicious air war between USAir Inc. and Atlanta-based ValuJet Airlines Inc., the no-frills carrier that quietly built Dulles International Airport into its second-largest hub during the past 12 months. By Feb. 8, the Kmart of eastern skies will bring its daily schedule to 17 nonstop flights.

ValuJet's rock-bottom prices forced ailing USAir, with 50 percent of nonstop flights to Florida from all three Washington area airports, to cut its lowest fares by 22 percent to save its market share. Other large carriers are watching this battle like spectators at a tennis match - moving to match fares only after each volley is fired.

With USAir's extremely high cost structure, the chances of making those fares profitable over the long term are slim to none. The company's strategy is clearly to swat the mosquito feeding on some of its plumpest routes.

Sound familiar? That's the same strategy that found USAir lowering prices out of Baltimore-Washington International when Southwest Airlines moved in and undercut the company in 1993.

``ValuJet has determined my strategy; I have no choice,'' said Robert Fornaro, USAir's senior vice president of market planning.

``If you give a low-cost carrier a large fare advantage, they start expanding and expanding and expanding; and pretty soon, they take all your traffic away,'' he said. ``We have a lot at stake in the Washington-Baltimore market. There's no way we're going to let ValuJet get the foothold they want.''

ValuJet's strategy is to become the no-frills carrier of choice out of Washington for destinations throughout the east, but especially to Florida. With the company's low-cost structure - it doesn't even issue tickets, instead using ``confirmation numbers,'' much like a hotel - it's possible that ValuJet could become a larger threat to the region's major carriers.

In Washington, flights to Florida are vital for both airlines. Eighteen percent of all USAir nonstops out of Baltimore-Washington International and National are headed to Florida. At Dulles, where USAir has only one flight to Florida, the company will expand service over the next month, adding three weekend nonstops to Orlando by March 5.

On Feb. 8, when ValuJet boosts its nonstops out of Dulles from 14 to 17, nine of those will be headed to the Sunshine State.

USAir escalated the Florida price war Jan. 12, when the Arlington-based carrier undercut ValuJet's $89 fares between Dulles and Florida. USAir posted rates of $69 and $79 each way to Florida out of National. The purchase date for those fares expired Friday.

ValuJet was expected to bite back Tuesday, lowering its lowest fares to Florida by $20.

The tiny airline, with 23 used DC-9s in its fleet, has grown experienced in the role of David vs. Goliath. Soon after ValuJet was launched in Atlanta on Oct. 26, 1993, Delta Air Lines divebombed the carrier with low fares and tripled capacity on ValuJet's introductory routes. ValuJet hung in anyway, establishing itself despite the pressure.

by CNB