The three carriers flying between Bermuda and the New York area have dropped their fares to $198 for a return ticket. In the latest move yesterday, Continental Airlines sent out thousands of flyers announcing the fare, and calling it "the fastest, most affordable way to New York this summer''.

But when the airline dropped its New York rate to $198 return on June 1, both American Airlines and USAir dropped their fares too. All three carriers said yesterday their offer was only good through the end of July.

Continental's regional director for Bermuda and the Caribbean Mr. Patrick Strasburger said the airline is hoping to stimulate air traffic on the route.

He said this offer would be the deciding factor for Bermuda residents who may have delayed a trip to New York.

"It gives us a chance to get people to try Continental who have not already,'' he said.

He said airfare wars in the domestic US market had put many Americans off travelling outside the US. "When (the pricing war) started in the US, it stifled international travel.'' It is expected that Continental may extend the offer beyond July and both American and USAir indicated they would probably have to follow suit.

American general manager Mrs. Carol DeCouto said the only way to remain competitive in today's market was to match reduced fares.

"All the carriers are hurting,'' she said. "We can't afford not to be competitive.'' American, the most powerful airline in the US, has been trying to rid the industry of heavy discounting that started in April when its rival Northwest Airlines began a sale that let an adult and child fly together for the price of one ticket. American responded by unleashing a half-price ticket sale expected to cost the troubled airline industry tens of millions of dollars this summer.

American then said it would eliminate all special discounts to make ticket pricing simpler and fairer for all travellers. The airline said the only way it could keep that system intact and still remain competitive with Northwest was to cut all its discount ticket prices in half.

American's efforts to change the system led to antitrust charges from other carriers including Continental, which is operating in bankruptcy, and Northwest. Northwest claimed American was engaging in predatory pricing intended to drive weak rivals out of business. But American says its pricing practices are legal and proper.

Mrs. DeCouto said the restructuring was mainly targeted at the domestic market, but added that in order to remain competitive with other carriers, American would in most cases match discounted rates outside the US.

American, using 194-seat aircraft, has two daily flights between Bermuda and New York, the first leaving Bermuda at 7 a.m. and the second leaving at 1.30 p.m. Flights to Bermuda leave New York's John F. Kennedy International Airport at 9.15 a.m., arriving in Bermuda at 12.25 p.m., and 4.10 p.m., arriving in Bermuda at 7.15 p.m.

Continental also has two flights each day, but uses wide-body jets which seat 257 passengers. Its early morning flight to Newark, New Jersey, leaves Bermuda at 8.15 a.m. while a second flight leaves at 12.50 p.m. Return flights to Bermuda leave Newark at 8.30 a.m. and 6.30 p.m.

USAir flies a Boeing 757 150-seat aircraft between Bermuda and La Guardia once each day.