Aa, Dl, & Nw Join Co's 3rd Fare Increase
- Thread starter USA320Pilot
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I'll bet you would like a professional quantitative analysis prepared for you, free of charge! Here's a cyber-quarter
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luvn737s
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So Clue, are you saying that all LCC's are guaranteed a 100% load factor anywhere they fly as long as they do not match fare increases? Do LCC's provide enough service to accomodate everyone that is willing to travel in a market on a given day? Of course not. Additionally, Southwest doesn't utilize distribution channels such as Travelocity, etc., so you don't have to have the lowest fare to show up first against WN. Airlines need to have the courage to withstand a temporary dip in bookings until the fare increases gain traction. Not everyone will be able to get a seat on WN and WN doesn't accomodate everyone's schedule, and lastly, some folks don't like WN (on-time ain't so great, even without ACARS). So the death spiral you envision, might not be any worse than the self-destructive behavior the airlines are currently engaged in. WN can decide to go after a particular market just to kill off a competitor, but that seems like a waste of assets.
Personally, I think the airlines are more than willing to cut each others throats if, in the end, it results in a much lower labor cost benchmark and the elimination of unions in the industry. It takes a while to manage an entire industry's expectation.
Personally, I think the airlines are more than willing to cut each others throats if, in the end, it results in a much lower labor cost benchmark and the elimination of unions in the industry. It takes a while to manage an entire industry's expectation.
I'm sure the journal meant to add the exception of routes capped by $299 one-way fares by Southwest and $499 one-way fares by Delta. Of course, if this is an indication of increasing the low-end fares and decreasing the high end fares... Then its a good thing... Airlines with flatter fare structures seem to be doing better. Of course, if the whole industry fare structure becomes "flatter", then those carriers with the flat fare structure advantage would have less advantage...USA320Pilot said:
Two comments:
1. What a fine bunch of posters to be grouped with!
2. I wouldn't mind doing some kind of analysis. However, I don't have access to the data. And quite frankly, the amount of data would be staggering. And then there are factors at play which are very difficult to predict... Like the exact elasticity factor of every fare in every market.
Besides, this data would only be available to "insiders" and the actual people doing the work in Revenue Management and Pricing Departments of the airlines.
For what its worth, as I quoted before, America West's CEO said AWA expected $1 to $2mil in extra revenue from the fare increases... Which is on a base of revenue of about $2bil... or 0.1% increase. When I noted that, Boeing Boy had some specific comments that maybe the effect was greater than that amount, but certainly not enough to overcome the increased cost of fuel.
3. I guess the extra $5/ticket wasn't enough for CO.
4. If USA320Pilot wants to read a good thread discussing the pricing environment for Airlines, he should read mweiss' lengthy thread entitled "Why Airlines Cannot Increase Fares" or similar... it was a few months back... Shouldn't be too hard to find.. It was a 21page long thread.... Not too many of those.
ClueByFour
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luvn737s said:
If this logic holds, then why bother matching the LCCs when they enter a market?
I mean, if all it takes is a "bit of traction," US would not match WN in PHL, PIT, Airtran in CLT, etc.
But they do. While LUV might not be in the GDS, it's been proven over time that they will swallow market share. Over. And over. And over again. For recent examples, I'd refer you to PHL-RDU, PHL-PVD, BWI-PVD, etc.
The union thing has already been accomplished (so far as the legacy carriers are concerned). Beating the tar out of labor is not going to help.
The smart way to handle fare increases is the way that LUV apparently does it--$1-$3 every year (or maybe twice a year) without making a large annoucement out of it. They can do this because they basically set the bar for what fares are, so people don't feel robbed when LUV asks for an extra buck or two. Of course, Southwest has always been about value, as opposed to the never ending death-spiral of trying to figure out how not to "leave money on the table."
whlinder said:
Dude:
You're reaching here. The only people who are privy
to fare increase information are those in pricing. As
far as I know, USA320Pilot is NOT employed in the
pricing department. Heck, for all we know, USA320
may not even be a US employee. It is common
knowledge that when one carrier files a competitive
fare increase, the others will follow. If they don't
they surely have poor management, because they
will lose out on the extra revenue that is gained
before the increase is rescinded. Stop harrassing
people on this forum please.
North by Northwest
Veteran
A Delta spokeswoman said the carrier made the about-face because "We're trying to remain competitive with the rest of the industry." She declined to elaborate.
But Jamie Baker, a J.P. Morgan analyst, said in a research note Monday that Delta may have made a mistake, leaving hope the latest increase would hold. Baker contends that Delta saw Northwest Airlines (NWAC:Nasdaq - news - research) cancel an overnight stay requirement and incorrectly interpreted it as a cancellation of the fare increase.
"As such, we maintain a high level of confidence that this increase will eventually stick by week's end," Baker wrote. His company, J.P. Morgan, does business and seeks to do business with companies covered in its research reports.
A Northwest representative declined to comment on Delta's move but said Northwest had kept the fare increase in place even after Delta and Continental opted out.
Thank goodness.
But Jamie Baker, a J.P. Morgan analyst, said in a research note Monday that Delta may have made a mistake, leaving hope the latest increase would hold. Baker contends that Delta saw Northwest Airlines (NWAC:Nasdaq - news - research) cancel an overnight stay requirement and incorrectly interpreted it as a cancellation of the fare increase.
"As such, we maintain a high level of confidence that this increase will eventually stick by week's end," Baker wrote. His company, J.P. Morgan, does business and seeks to do business with companies covered in its research reports.
A Northwest representative declined to comment on Delta's move but said Northwest had kept the fare increase in place even after Delta and Continental opted out.
Thank goodness.
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luvn737s
Guest
I recently looked at a fare from PHL to PHX. $478 on HP and $1170 on US. US doesn't fly empty out of PHX so someone is willing to pay these fares. Why match the lowest fare? Lower the fares a little maybe to entice people to travel, but don't give the store away. Remember it's not what you make, it's what you keep. If you run fares down trying to get the last customer, you end up keeping nothing.ClueByFour said:
ClueByFour
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luvn737s said:
What were the terms of the fare? If it was for the following day, of course US is not flying empty, but they are not filling planeloads at that differential.
Further, HP will get a lot more walkup traffic at $478. Unlike the late 1990s, there are not that many suckers running around anymore.
You don't have to have the lowest fare. You need fair fares. The majors, for the most part, don't get the difference. US, in non-gofare (or, what I'll call "blowfare" markets) still does not get it. The problem is that the number of city pairs available for extortion continues to drop at an alarming rate (for the majors).
But forget that. What does it tell you that WN was not the incumbent on routes like PHL-PVD or PHL-RDU, and now has like 50% market share on both, despite not always being the cheapest?
The old paradigm of yield management is never going to work domestically again.
USA320Pilot
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I cant figure out these idiots. What possible reason would Delta drop their fares again? were talking 5 or 10 bucs. Do they actually think Joe Pax is going to go visit his favorite Aunt in backwater USA, but found out about the ticket costs $5 more so scuttled his whole trip? This is just insanity! That being said I expect to hear about U's new sale. This sale will have the crew paying the passengers to fly with us. In a statement from CCY " This new initiative will greatly increase our load factor, allowing US AIRWAYS to have the highest load factor of any carrier" When asked what good is load factor, when the airline is making zero revenue, CCY commented " Labor costs are too high, and having the crews pay passengers, will take care of two problems at once".
It might be common knowledge, and it is fine to say 'since AA/CO/DL/NW raised fares, I expect US will follow.' Or "my opinion is that US will follow the increases." But he didn't say that. He saidSpinDoc said:
and
USA320Pilot said:
No where does it say "in my opinion" or "I believe" which is what he claims to say when he offers an opinion as opposed to offering 'information.' In fact he wrote "It's my understanding US Airways will match this increase too, except in GoFare markets."
He answered my questions with:
USA320Pilot said:
So if the only people who are privy to fare increase information are those in pricing, where did he find public sources? Pricing folks are certainly NOT public sources before the fare action has occurred. I don't know if he is trying to sound smart or prove that he has inside 'sources' or what, but he has yet to offer a fully rational explanation for his comments. He can say "it was my opinion" or "US had already implemented the changes and thus I was presenting public knowledge but trying to pass it off as though I have inside info to make myself look smart" or "it was just a rumor I heard." Those are certainly adequate responses.
I am also curious how it is common knowledge that if a carrier raises fares that all the others will follow. They have been trying to raise fares for months and couldn't succeed until last month because someone always held out.
So you think US should just blindly match all their competitors fare changes? They shouldn't make smart pricing decisions? I guess raising fares has no effect on the quantity of tickets demanded by consumers? Raising fares can never hurt total revenue?
If you consider it harrassment to ask someone to answer a simple question to prove they are not violating anti-trust law, then I guess I am guilty of harrassment. But hey, with a name like SpinDoc you probably worship the king of Spin.
I'm flattered. 🙂 Of course, you realize that he ignores me, so he's not going to read my drivel. Or, if he does, he won't acknowledge it. Personally, I think he's scared to spar with me. 😀funguy2 said:
Incidentally, while it's true that I spewed a great deal of cyberink on the topic, I never drove the last nail into the topic; Bob Owens stopped playing...I think he saw the mate-in-two.
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