31 replies to this topic

[Busdrvr]

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On 9/26/2002 5:11:58 PM DalMD88 wrote:

I would expect to pay more to get there faster.

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And Safer

[KCFlyer]

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[BLOCKQUOTE][BR]----------------[BR]On 9/26/2002 5:11:58 PM DalMD88 wrote:[BR][BR]You guys have seemed to miss my point.  What is your time worth?  The trip by bus and train take 24 HOURS. Lga-Atl-Mco takes about 4.  I would expect to pay more to get there faster.[BR][BR][BR]----------------[BR][BR]I don't think I'm missing your point.  Bottom line, the taxes are keeping people from flying is a joke.  All I'm saying is that if the goverment eliminated all taxes, that savings would most likely not be passed on to the consumer.  But that's not all that bad, because the consumer who is willing to pay $200 (taxes included) will still be willing to pay $200.  In the case of this example, the $182 fare translates into .08 cents per mile.  It costs Delta .1005 cents per mile to fly the seat, occupied or not.  For $215, Delta could break even, for $220 there's a small profit.  The other side of that is that an unrestricted ticket on the same route costs $872...Assuming that 25% of that is taxes, it's still a fare of $682, or .31 cents a mile.  Imagine if Delta had the cajones to just make the unrestricted  fare $400, and eliminate the BS use it or lose it and $100 change fees on the advance purchase.  How many businesses would find it worthwhile to try and play the hidden city game when the difference between the advance purchase fare and the full unrestricted fare is less than $200 round trip?  If they adopted a value pricing structure, they could charge $220 for 21 day advance, $280 for 14 day advance, $350 for seven day advance, and $400 for the unrestricted ticket.  Make the only restriction a one night stayover - any night, not just Saturday.  [BR][BR]Example - on Southwest, the difference between the lowest and highest fare I can buy from MCI-BNA (about 600 miles) is $37 one way.  The difference between the lowest and higest fare I can buy on United between MCI and DEN (about the same distance) is $512.75.  Although, United has half the equation right, at least their lowest fare is covering the expenses (but not by much).  Imagine how much travel would be stimulated if there was only a $100-$200 difference between the lowest and highest price tickets they offered on that route.  And the fare (174.50 round trip) is a smokin' deal, but you know something... I'd pay $200 to avoid the drive across western Kansas to get to Denver, and still think I was getting a bargain.  That's me the leisure traveller.  If I were a business owner, I might think twice about sending someone to Denver for $1200 round trip, but if the fare was $400 for the round trip, then it's a no brainer - my employee is heading to the airport.  And if for some reason I GOT the $200 round trip and my employees plans had to change, I'm REALLY inclined to fly you if I can call you up and change his reservation and upgrade to the full fare price for his return without the stupid change fee...it's only going to cost me another hundred bucks.  Sorry for using UAL in this example, but fares to ATL have been pretty competitive because of Vanguard (RIP- but Airtran has moved in to fill the void).  [BR][BR]That's what I can't understand what management at the other airlines is missing - SWA made a profit, even in these worst of times, and the fare difference between the lowest and highest fares are not even a couple of hundred dollars apart.  The other airlines could lower the fares, reduce the difference between the lowest and highest fares, stimulate travel and make a profit - even at their current cost levels.  [/BLOCKQUOTE]

[Tango-Bravo]

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KC Flyer wrote:

That's what I can't understand what management at the other airlines is missing - SWA made a profit, even in these worst of times, and the fare difference between the lowest and highest fares are not even a couple of hundred dollars apart.  The other airlines could lower the fares, reduce the difference between the lowest and highest fares, stimulate travel and make a profit - even at their current cost levels.  [/P][/BLOCKQUOTE]
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How right you are IMO.  Trouble is, such a self-evident truth makes far too much sense to fall within the decision making processes of the high cost, full-service U.S. cartel airlines.

[DLFlyer31]

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KC Flyer wrote:

That's what I can't understand what management at the other airlines is missing - SWA made a profit, even in these worst of times, and the fare difference between the lowest and highest fares are not even a couple of hundred dollars apart.  The other airlines could lower the fares, reduce the difference between the lowest and highest fares, stimulate travel and make a profit - even at their current cost levels.  [/P][/BLOCKQUOTE]
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Not true.  If DL lowered the higher walk-up fares, it wouldn't necessarily stimulate that much more demand.  Even WN is having a harder and harder time attracting higher-yield walk-up traffic...hence WN's recent reduction in walk-up fares.  You think WN is reducing those walk-ups out of the kindness of LUV's heart...I don't think so.  WN is also finding it harder to attract traffic and has publicly stated so.  The difference is that WN has a low enough cost structure that they can sustain this massive drop-off in walk-up traffic.  If WN had DL's cost structure, then WN's pricing structure would also fail.

In order for your plan to work, DL would need to lower the walk-up fares which would stimulate some demand PLUS DL would need to raise the leisure fares.  Unfortunately, DL can't raise leisure fares without scaring off a lot of traffic.  

Don't get me wrong, WN is a great company, but trying to apply WN's pricing methods to DL just won't work.  DL HAS to lower its costs first, then they can start to adopt some of WN's pricing practices.  In the long term, DL will be forced to adopt WN's pricing structure in most markets as low-fare carriers become more and more entrenched.

[KCFlyer]

[P]DLFlyer31 - Check my math here:[/P]
[P]It's 2448 miles from NYC to LA, one way. [/P]
[P]Southwest's charging $299.  That works out to 12.21 cents per mile.  [/P]
[P]Delta's costs are 10.05 cents per mile.  [/P]
[P]You could fly the route at $299 and make a profit.  My point is, why charge a $2,000 maximum fare, and offer a slew of seats at a loss?  You could offer your advance purchse fare for $250 and break even (even make a slight profit).  You could offer your unrestricted fare for $856 (35 cents per mile) and make a nice profit.  [/P]
[P]If those were the only two fares you offered, youraverage fare would be $553 [/P]
[P]Your average load factor is 73.39% [/P]
[P]Your CASM is 10.05 cents[/P]
[P]A 767-300 holds 252, 73% of the seats filled is 185, 185 times your average fare of $553 is $102,305.[/P]
[P]Your cost to fly that plane (.1005 time 252 seats times 2448 miles) is 61,998[/P]
[P]You've made a profit of $40,307 for the flight. That doesn't include first class fares - that assuming it was only coach passengers.[/P]
[P]I would venture to say that you'd see your load factor increase by doing that.  But nobody has guts enough to try it.   if SWA lowered their fares to stimulate demand, why on earth are the other airlines sitting back discussing labor concessions and cutbacks...why aren't they following suit?  Sure, you don't have to drop your fares to the $299 level, but at least try to make it appealing for a company to spend their travel dollar.  All I have seen is a bunch of below cost fares with a whole lot of restrictions that make them totally unappealing to business accounts, but leisure travellers are gobbling them up to the tune of 73% load factors....and you are LOSING MONEY ON THEM.  Yet, the fare you'd like them to pay hasn't budged.  Oh, they've offered some cut rate walk up fares....still loaded down with use it or lose it and $100 change fee restrictions.  That's what puzzles me...nobody has tried this approach.  Even if SWA offered $299, you could still charge $550 max and get businesses to fly you, using the nonstop flight, meal, and whatever else you needed to do to justify the fare difference.  It could be done.  But I guess it's easier to appeal to the government for bail out money, or turn to the bankruptcy courts as some airlines have done to reduce their costs.  But here's the deal...even if you're paying your labor force $5 an hour and still charging over a thousand bucks for a one way transcon flight, you're STILL going to see losses. I'm not a betting man, but if I were, I'd put money down that MY plan would do more to help the airlines than any amount of concessions ever will. [/P]

[DLFlyer31]

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On 9/27/2002 11:41:46 AM KCFlyer wrote:
You could fly the route at $299 and make a profit.  My point is, why charge a $2,000 maximum fare, and offer a slew of seats at a loss?  You could offer your advance purchse fare for $250 and break even (even make a slight profit).  You could offer your unrestricted fare for $856 (35 cents per mile) and make a nice profit.  [/P]
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One big problem with your logic....no one will pay $250 one-way on an advance purchase ticket.  Roundtrip, that would be almost $600 (including taxes) for an advance purchase.  DL would lose half of its passengers in the blink of an eye.  Trust me, I know that the current advance purchase fares are obscenely low, but DL can't raise them.  There's too much capacity in the market and too many low-fare carriers that would eat DL alive if they raised leisure fares.

Even on the unrestricted fare, do you really think $856 each-way would entice that many passengers?  It won't....that's exactly why WN keep's lowering their walk-up fares because even WN can't find enough walkup traffic.  Even at WN's extremely low walk-up fares, they're having a hard time attracting pax.  

I understand your fundamental argument and I agree with it.  However, it just doesn't work given the cost structure of DL, AA, UA, etc.  If DL can get its costs down, then they can (and should) adopt the pricing structure you are suggesting.

I can guarantee you that if WN had DL's cost structure then WN's entire pricing structure that you are advocating would collapse.  WN only gets away with their rational pricing structure, because they have the cost structure that allows for it.  Take away the cost structure and it all goes away.

[KCFlyer]

Guess I just don't see why costs must be lowered before you can try that... Southwest's costs are 20% lower than yours.  Tthe difference between their highest unrestricted fare and the highest unrestriced fare on Delta is somthing like 400%.  And airlines are reluctant to do anything to spur business travel.  They're filling their planes with super de duper leisure fares and still hoping against hope that some fool will pay 10 to 15 times what the leisure guy paid in order to make a profit.  The fools aren't paying, and the airlines go a begging for money because the unrestricted fare is sacred, and cannot be cut.

[Tango-Bravo]

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On 9/27/2002 9:03:43 AM DLFlyer31 wrote:

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DLFlyer wrote:

In the long term, DL will be forced to adopt WN's pricing structure in most markets as low-fare carriers become more and more entrenched.
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How right you are in this part of your post.  The long term however begins now.  Even as low-fare carriers become more entrenched due to the opportunities handed to them by the absurdly irrational pricing practices of DL and fellow cartel airlines, so too are the cartel's best customers becoming entrenched in their umbrage toward the pricing games and their determination to not only beat, but trounce, DL and the cartel at their own games.

It was, in fact, a DL customer who has flown 2.5 million miles with DL since 1987 and belongs to the highest level of their frequent flier program (100k+ miles per year) who summed up his thoughts--and no doubt the thoughts of most frequent fliers (after writing letters and hearing the same-old same-old worn-out canned drivel from a DL spokesperson in defense of the indefensible):

The airlines' breathtakingly complicated yield-based pricing structures are...antithetical to everything we do in a normal business environment..  As a result, a valued DL customer is flying one-third fewer miles and looking for bargains.  (from article One business flier has had enough of unfair airfares by Joe Sharkey, New York Times, appearing in the Star Tribune March 11, 2002)

With all due respect to DLFlyer and others of the we can't afford fare reform now line of thinking I say that DL and the cartel cannot afford not to make pricing rationalization their highest priority.  By sticking with the grossly inequitable fare nonsense currently in place (and even tweaking it to become even more absurd, it seems) the cartel is not only handing the low-cost carriers more opportunities than they can respond to, they are also--and this should be of even greater concern--strengthening the resolve of their best customers to beat DL and the cartel at their own games.  

There's no question as to who is getting trounced in the pricing games played by the cartel airlines.  When one's game plan results in getting their butts kicked month after month over a period of two years, a seriously revised gamed plan would seem to be called for.  But then again, as the elitest of the elite DL ff stated, the cartel airlines excel at business models that are antithetical to everything we do in a normal business environment.  So too are their testosterone-driven decisions antithetical to sound judgment and common sense.  And that, more than anything, is what separates Southwest and jetBlue from DL and the full-service cartel airlines, and the reason WN's market cap alone is higher than all of the cartel airlines combined.  And that is also why the full-service majors have earned the distinction of becoming the answer to the question what is America's worst-managed industry?