Amid swine flu scare, airlines slash Mexico fares

With tour companies both here and abroad and cruise lines either halting flights and port calls or liberalizing cancellation policies, Bloomberg News is reporting that the airline industry is having a fire sale to Mexico.

Delta Air Lines Inc., American Airlines and other U.S. carriers are slashing Mexico fares to as little as $260 round trip as demand dries up because of the swine flu outbreak.
An American ticket to Mexico City from Dallas/Fort Worth sold for $260 yesterday from about $500 recently, said Tom Parsons, founder of travel website BestFares.com. Delta is charging $300 between Atlanta and Cancun, a reduction of at least $100 from a few weeks ago ...
“If you’re paying more than $300 right now to anywhere in Mexico, you’re nuts,” said Rick Seaney, chief executive officer of ticket research firm FareCompare.com. “This isn’t the busy season for them anyway. But who wants to go there right now when these governments are basically telling you not to?”

The question is: Why aren't the airlines canceling? On its face it seems odd, particularly given the ailing condition of the industry. Why would you want to fly empty planes into a place where many people are afraid to go?
In its report, Bloomberg reported that despite the lower fares the carriers weren't exactly inundated with callers looking to cash in:

Delta, American, UAL Corp.’s United Airlines, Continental Airlines Inc. and US Airways Group Inc. have all said that they’ve seen more passengers wanting to cancel or postpone trips to Mexico. They wouldn’t give details.

The AP is reporting that "airlines are flying some nearly empty planes from the United States to Mexico,'' and its report suggests a reason why more flights aren't being canceled:

Airlines sometimes have to fly planes with few passengers in order to position the aircraft for return flights, and that could be happening now. "The flights coming back north are full," said Continental spokesman Dave Messing.

Another Continental representative, Julie King, said that trimming schedules would not be out of the question. "We're constantly monitoring the situation and will be prepared to adjust our schedules as necessary while ensuring that we provide return service to customers in affected cities.''
This is significant coming from Continental, which is the US industry leader in flights to Mexico, with American and US Airways second and third, respectively. Today, for instance, Continental has 66 flights to Mexico, American has 42, and US Airways 24.
Analysts say that other carriers are likely looking at Continental to see what adjustments it is making.