Allowing Bk Carriers To Destroy The Industry

[mweiss]

For the industry, i submit, it is inelastic, for an individual company it is completely elastic.

For the business traveler, it has historically been relatively inelastic. Beginning in 1999, the elasticity increased substantially in that demand mode. For leisure travelers, demand has always been particularly elastic. That remains unchanged.

But if you claim it is elastic at that fare level, then a reduction in the confiscatory tax level the government charges WOULD strongly benefit the airlines.

[post="255473"][/post]​

Of course it would benefit the airlines, at least in the short run. In the long run, it depends on where the funds from the tax would go. "Strongly" depends on your definition.

 

[Busdrvr]

For the business traveler, it has historically been relatively inelastic. Beginning in 1999, the elasticity increased substantially in that demand mode. For leisure travelers, demand has always been particularly elastic. That remains unchanged.

Of course it would benefit the airlines, at least in the short run. In the long run, it depends on where the funds from the tax would go. "Strongly" depends on your definition.

[post="255489"][/post]​

Funny, I must have mistaken you for someone else claiming that raising the ticket tax a few bucks would have no effect...

Elastic for leisure travel? Doubtful. maybe at $500 for a transcon, but not in this range.

 

[mga707]

Okay how about something more realistic like Missoula to Orlando. Still only three choices (UA, DL and NW) and if you go on travelocity you'll find the fares for a round trip MSO to MCO are ridiculously low from around $280 to $325. No LCC competitor in sight and the fares are still dirt cheap.

MSO is only about two hours from GEG on I-90. GEG=WN.
LCC competition isn't necessarily airport-to-airport, especially out here in the West where driving a couple of hours to save some airfare bucks is a common occurrence.

 

[Bigsky]

MSO is only about two hours from GEG on I-90. GEG=WN.

Let me get this straight. You think people drive two hours though the mountains to get on a frickin cattle car that doesn't even have assigned seating. Frankly I would pay a little more to ride on a carrier like NW as I don't think I could handle the WN FA's going through the same old, "If your sitting next to a child or someoone acting like a child please put on your mask on before assisting them." Or there's also the "Ladies and Gentleman we're going to play a little game. We want you to guess the cumualtive age of our flight attendants." Oh, how fun!!!...much better than listening to some good jazz on my Ipod, can I play?!!!!

 

[Red Tail Bear]

MSO is only about two hours from GEG on I-90. GEG=WN.
LCC competition isn't necessarily airport-to-airport, especially out here in the West where driving a couple of hours to save some airfare bucks is a common occurrence.

[post="255680"][/post]​

I thought that the purpose of flying was to avoid spending hours driving a car. And I suppose renting the car,putting gas in it ,or paying for parking are all free out there in the west. The fares Bigsky quoted in response to your post dont sound to bad to me.

 

[mweiss]

Funny, I must have mistaken you for someone else claiming that raising the ticket tax a few bucks would have no effect...

You must. Feel free to show a quote where I said that it would have no effect.

Elastic for leisure travel? Doubtful. maybe at $500 for a transcon, but not in this range.

[post="255677"][/post]​

Sure it's elastic for leisure travel, at any price point. For business travel, there are few substitutes. For leisure travel, there are many substitutes. That effect, all by itself, makes a huge impact on the elasticity. And there are other factors as well.

 

[mweiss]

You think people drive two hours though the mountains to get on a frickin cattle car that doesn't even have assigned seating.

"People" do. Not everyone, most certainly, and few would do so unless the fare difference were substantial.

Frankly I would pay a little more to ride on a carrier like NW

So would I, but you and I aren't everyone. And how much is "a little more?" Would you pay $700 more to do so?

I thought that the purpose of flying was to avoid spending hours driving a car.

The purpose of flying is to get to the destination more quickly. For distances greater than about 200 miles, and all other factors being equal, people would choose to fly rather than drive. All other factors are not equal, however.

 

[WorldTraveler]

I've glossed through this topic which has gone through many topics but I'll contribute a few cents worth of my insights:

1. I haven't seen anyone suggest (unless I missed it) that the reason NW is all of the sudden getting righteous about taking fare increases is because NW employees have been VERY vocal about their employer being unwilling to take increases while asking for concessions. Perhaps NW recognizes they have to ask for deeper concessions and it's time to start admitting that increases actually do generate some increased revenue. Interesting also that NW is interested in fare increases even though the threat of LCC growth across its network has grown through the ATA/WN marketing agreement.

2. CO/DL/NW are REQUIRED by the Feds as part of their codeshare agreement to maintain identical fares on markets where the codeshare exists. There is no competition between CO/DL/NW on flights operated by one for another of the two airlines.

3. Interesting comment about DL/UA. Glad to see that a recognition is growing that UA has got to be thinking of a way to dump US. As the industry consolidates, there is no way DL, CO, and NW can remain in partnership. Unlike current domestic codeshare relationships, a DL/UA relationship will be much more extensive with revenue sharing and joint planning. It will also likely be cemented by an investment of some kind - perhaps one or both of UA or DL's international partners. At some point one or the other will become the surviving airline; unless UA gains a significant financial advantage, I expect it will be DL (the one that is NOT in bankruptcy but has continually used the threat of BK to reduce costs).

4. Airport capacity will not affect whether the industry is able to support consolidation, Mr. Weiss. The largest and most popular airports will continue to be chocked full. Smaller cities like PIT and STL and other former strength/hub markets will have excess capacity but that won't at all stop consolidation from occuring or working. If PIT had too much capacity because one airline deemed it necessary for their network, there is no reason to think someone else has to take that capacity and put it to use.

all for now.... carry on.

 

[funguy2]

2. CO/DL/NW are REQUIRED by the Feds as part of their codeshare agreement to maintain identical fares on markets where the codeshare exists. There is no competition between CO/DL/NW on flights operated by one for another of the two airlines.

Interesting... I would not have thought that the feds would force competition, but it would seem that if NW is offering the lowest fare of $99 on a route operated by only NW, but the CO and DL code-share on NW could be purchased at $79 or $119, the feds would not care because its competition between the three carriers, even if the seats are on the same physical aircraft.

The fact they require the same fares is interesting, and I'd be interested in how it works. Some posters on these boards have noted fare differences between UA and US on the identical flights depending on which carrier you purchase from. I have not heard that about CO/DL/NW. Maybe this is the reason why.

Seems like an interesting federal policy difference between the two code-shares.

I would presume that the operating carrier (i.e. NW on MSP-MSO) gets to set the fares and the the partners (i.e. DL and CO on MSP-MSO) would have to accept them and display the same fares as NW for an identical routing?

Interesting.

 

[NWA/AMT]

1. I haven't seen anyone suggest (unless I missed it) that the reason NW is all of the sudden getting righteous about taking fare increases is because NW employees have been VERY vocal about their employer being unwilling to take increases while asking for concessions.

[post="256325"][/post]​

It seems unlikely that this was their reason for doing so, particularly since the employees have been telling them that for over three years now.

It's far more likely that they're seeing increased demand, and/or strong early bookings for summer, and have decided that the market will bear an increase without decreasing demand, which has been their reason for avoiding fare increases previously.

 

[Busdrvr]

Sure it's elastic for leisure travel, at any price point. For business travel, there are few substitutes. For leisure travel, there are many substitutes. That effect, all by itself, makes a huge impact on the elasticity. And there are other factors as well.

[post="256308"][/post]​

You might want to dust off the micro book. Nicholson would be very disappointed

 

[jimntx]

I agree that is VERRRRY interesting. Last year I was trying to find an affordable fare for my sister and brother-in-law to go skiing at Whistler in Canada. DFW-YVR non-stop on AA was going to be over $1000 each in coach. DFW-SEA (thinking they could bus it from there) was going to be over $800 each.

I then went to Orbitz or Travelocity and found an AS fare from DFW to YVR (with a change of planes at SEA) for $500 and change. Now, I knew for a fact that AS does not serve DFW. When I looked at the routing it was an AA codeshare from DFW-SEA and it was on the same flight that was going to cost over $800 if booked at AA.com. Go figure.

 

[whlinder]

2. CO/DL/NW are REQUIRED by the Feds as part of their codeshare agreement to maintain identical fares on markets where the codeshare exists. There is no competition between CO/DL/NW on flights operated by one for another of the two airlines.

Are you sure about this? Can you find a link or something, I'd be interested to read how this is set up and required. Briefly checking one market, MSO-WAS, CO does not fly to MSO, yet they have the lowest fare in the market. CO codeshares on MSP-MSO and MSP-DCA. DL does not codeshare with anyone to MSO as they already fly there, and I can't find any evidence that NW or

3. Interesting comment about DL/UA. Glad to see that a recognition is growing that UA has got to be thinking of a way to dump US. As the industry consolidates, there is no way DL, CO, and NW can remain in partnership. Unlike current domestic codeshare relationships, a DL/UA relationship will be much more extensive with revenue sharing and joint planning. It will also likely be cemented by an investment of some kind - perhaps one or both of UA or DL's international partners. At some point one or the other will become the surviving airline; unless UA gains a significant financial advantage, I expect it will be DL (the one that is NOT in bankruptcy but has continually used the threat of BK to reduce costs).

I agree with this scenario playing out, but I think the dancers will be finding different partners at the ball. I see DL and NW together, with CO and UA dancing together. Why? Global alliances. DL/AF and NW/KL are very tight. Who is CO's tight international partner? AF+KL will be quite tight with both DL and NW; both DL and NW will have anti-trust immunity with the combined AF+KL. I can't see how that can work without DL and NW having the same immunity eventually. No way will CO also be allowed in that party. CO's network matches up too well with UA's for them to consider anyone else.

As for UA dumping US, I think US needs UA more than the other way around. I wonder if UA can get a sweet deal out of US in exchange for continuing their partnership. Since everyone else seems to be getting a sweet deal out of US, well except the employees...

 

[mweiss]

2.  CO/DL/NW are REQUIRED by the Feds as part of their codeshare agreement to maintain identical fares on markets where the codeshare exists.

I don't believe this, because I've seen evidence to the contrary. In looking at the published fare list (this was about a year ago), I found that the lowest published fare on a particular NW-metal route was offered by DL. NW had a higher lowest published fare, and CO had the highest lowest published fare. This analysis leaves aside entirely the yield management of the three airlines; it is strictly based on published fares. The offered fares diverged further when looking at available buckets.

4. Airport capacity will not affect whether the industry is able to support consolidation, Mr. Weiss.

Sure it will. You just miss the point of my argument. Looking at the airports that will continue to be "chock full," there's still more capacity than demand. What would be the point in maintaining a bunch of hubs within a short drive of each other? That only serves to reduce efficiency.

 

[mweiss]

You might want to dust off the micro book. Nicholson would be very disappointed

[post="256373"][/post]​

How about you play Nicholson? :huh: