Word: discounts
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...cruel winds of change. Yet Woolworth suffered not from forces beyond its control so much as from generations of five-and-dime management of the 118-year-old chain. In the '60s the company was late in following its customers to malls, and its attempt at a discount chain, Woolco, lasted just 20 years. Similarly, in the early '90s, Woolworth homed in on mall locations just as shoppers were abandoning mall shopping in droves...
Airline profits have gained altitude in recent years, with full jets and rising prices providing lift. According to Tom Parsons, editor of Best Fares Discount Travel Magazine, the major airlines have boosted fares 37 times since May 1992. Fares are up 18% since January, with business travelers shouldering a 25% increase. No other industry in the country currently has such pricing power...
...Discount airlines are still the most potent force in challenging the high fares in the majors' "fortress hubs." Before ValuJet resumed service between Atlanta and Dallas-Fort Worth in April, a round-trip ticket cost $490; subsequently, the price dropped to $138. Flying into an "alternative city" served by many discount carriers can also shave dollars. A round trip between San Diego, Calif., and Washington costs $564, but flying into Baltimore, Md., instead, a route now covered by Southwest, costs $268. "The low-cost carriers are driving the big guys crazy in cities where there was no competition," says Parsons...
Launching a carrier into this turbulence isn't much more difficult than flying a kite in a hurricane. Yet Martin Shugrue, no stranger to troubled airlines, insists that Pan American World Airways, a new carrier with an old name, can compete as a low-cost, full-service discount carrier. "We'll make money with a high-quality product at an affordable cost," Shugrue says. Pan Am's promise is cheaper fares without the cramped seats and the bag of peanuts masquerading as in-flight service. Says he: "It's not rocket science...
...rocket science is predictable, and there aren't other rocket companies waiting to shoot yours out of the sky, as is happening to the discounters. Of all the newer crop of start-ups (those in business since the early 1990s), one of the few winners is Reno Air Inc., which posted a net profit of $2 million last year. The five sizable publicly traded discount airlines lost a combined $58 million in the first quarter of 1997, while most big carriers enjoyed sky-high profits. "You have to find a niche and stay with it," says Bob Reding, Reno...