Another Fare Increase

[BoeingBoy]

U.S. Carriers Raise Fares by $10 to $20

Friday May 13, 5:30 pm ET
By Brad Foss, AP Business Writer
U.S. Carriers Raise Airfares by $10 to $20 Roundtrip in Most Markets, Stung by Rising Fuel Costs

In an effort to stem huge losses, the big U.S. airlines increased their domestic ticket prices heading into the weekend by $10 to $20 roundtrip, depending on the length of the flight.

Jim

 

[insp89]

U.S. Carriers Raise Fares by $10 to $20

Friday May 13, 5:30 pm ET
By Brad Foss, AP Business Writer
U.S. Carriers Raise Airfares by $10 to $20 Roundtrip in Most Markets, Stung by Rising Fuel Costs

In an effort to stem huge losses, the big U.S. airlines increased their domestic ticket prices heading into the weekend by $10 to $20 roundtrip, depending on the length of the flight.

Jim

[post="269368"][/post]​

BoeingBoy, Does this mean that Southwest's stranglehold on industry pricing is loosening ? [Due to Fuel Hedging]

 

[BoeingBoy]

insp89,

All I know is what the articles say, but it appears that for the most part these fare increases (all of them) mostly apply to markets without LCC competition. So the LCC's, with WN having the advantage due to extensive hedging, still have influence in pricing.

Separately, there was an article in Aviation Week about both AirTran and JetBlue wanting to see prices increase. Rather the WN, they pretty much both blamed the glut of low-fare seats on the east coast from fare sales - US and IndyAir trying to pull in cash at any cost.

Jim

 

[ELP_WN_Psgr]

BoeingBoy, Does this mean that Southwest's stranglehold on industry pricing is loosening ?

The real problem is fares don't mean much anymore.

Airlines set fares wherever they want but the problem is they don't abide by them too rigorously.

There are so many fare buckets in each class of service on every plane I don't think anyone knows what the fare is between any two points. (Mind you, I'm referring to the legacy carriers.)

As far as Southwest's pricing power, they've nudged their fares up a buck or two over the last several months, and they aren't plopping as many real cheap seats out there for the busy summer travel season.

If the legacy carriers somehow do manage to make a $10 or $20 fare hike stick, what that does is (1) drive folks over to the lower priced carriers and (2) dampen demand which means (3) load factors go down which (4) excites the management of the legacy carroers who (5) grab the yield management folks by the neck and shake them unti the yield management people (6) open up a bunch of low priced fare buckets to jazz up the load factor which puts the airlines right back where they started.

The real problem in airline pricing is not that fares are too low. The problem is that nobody pays the full fare.

The cheap advance purchase tickets, especially on long haul flights , are usually way too low. The walk up fares, especially on short haul flights, are way too high.

The cost of tickets should be related to the cost of production.

Transcons should not be priced at $99.

PIT to BUF should not be priced at $477.

Blame American and their SupersAAver fares for this. Once upon a time the biggest headache was peak and off peak.

 

[MR AIRPORT]

That's exactly correct. About 20 years ago there were basically five or six different fares. First Class, Coach Class, maybe a discounted one way fare, a one week minimum stay Tuesday/Wednesday travel with a 1 week minimum and a 2 or 3 week maximum stay. Also a non Tuesday/Wednesday travel with the same restrictions, plus a Saturday night only stay with a return date up to 60 days. Then came Bob Crandell and the American Airlines Ultimate Super Savers. What a pain in the ass, and it's been all down hill from then. I remember paying $222.00 for a round trip ROC-TPA flightabout 25 years ago and the fares are still about the same give or take a few dollars. It still get me pissed when people get on an airplane and sit for a few hours and basically trash the airplane and then complain about how the airplane looks. Remember when you had to get dressed up to fly and it was a privilege. Those days are now long gone, all flying now is a Greyhound with wings.

 

[UseYourHead]

I guess I could go along with this to degree; however, lets be real about what else is happening and the motivation for.

Airlines also attack each other with the motivation to drive each other, often times one airline attepting to driive the other out of business. Delta's recovery plan for quite a was to drive US Airways out-of-business to get the pay off of less capacity and competion on a significant part of the DAL route system. Airtran targeting US Airways markets, and then of course Southwest.

Does anyone really believe fare would not go up if say US Airways or UAL went away?

So IMHO, a significant part of irrational pricing is a by-product of airlines smelling cometitors blood, and attempting to expliot those opportunities.

It is a bit surprising there has been little or no debate about preditory pricing as it is clearly alive and well (and this time around would be directed at the LCC's as offenders rather than legacy airlines).

The real problem is fares don't mean much anymore...The real problem in airline pricing is not that fares are too low. The problem is that nobody pays the full fare.

[post="269571"][/post]​

 

[BoeingBoy]

It is a bit surprising there has been little or no debate about preditory pricing as it is clearly alive and well (and this time around would be directed at the LCC's as offenders rather than legacy airlines).

[post="269619"][/post]​

For IndyAir a case could probably be made that they're offering some fares well below cost, but they're probably the only one - at least on the east coast. As for the others, that's what's missing from your charge. Just selling tickets for less is not predatory - you have to price below cost, preferably well below cost, for the charge to have substance.

On the other hand, have you looked at the yields on some of the fares US has offered this year? If they weren't so obviously used to keep cash coming in, they would be a textbook example of predatory pricing....purposely losing money in a market over the short term in order to offer enough cheap fares to drive a competitor out of business or out of the market.

Jim

ps - on AMR - they did try to institute "value pricing" - a simplified milage-based fare structure - in the early 90's (91 0r 92 IIRC), but no one went along and the effort died.

 

[trvlr64]

. Remember when you had to get dressed up to fly and it was a privilege. Those days are now long gone, all flying now is a Greyhound with wings.

[post="269610"][/post]​

LOL PRIVILEGE to fly......guess what.......so is driving a car. The "privilege" came about because not everyone could afford to fly in the by gone days. If we lived like that today, then I guess there'd be less cars on the road too.

<_<

 

[Harry Callahan]

Dont get to dressed up or you may be mistaken for an air marshal!

 

[longing4piedmont]

Remember when you had to get dressed up to fly

[post="269610"][/post]​

I guess I don't know what you mean. I see people all the time on WN with clean underwear and wearing their shoes . Some of them even brushed their tooth.

 

[TomBascom]

Predatory pricing? Give me a break! The occasional sale fare might be as low as 50% below cost.

If you want to complain about pricing to the DOJ how about gouging. Airlines routinely and blatantly engage in pricing activities that, in other industries, are illegal. If your local gas station were to attempt to price gas the way US prices monoply routes (try PIT/MHT for an example) the owner would be cooling his heels for a good long time. This, more than anything else, is why the legacy airlines are in the bind they are in and why no consumer feels any sympathy for them.

 

[UseYourHead]

I agree Jim,

There is blame to go all around on this subject. They do it to us, we in BK do it back, it seems to be an endless cycle.

At some point you would hope the crazyness moderates and some sensible money making policies prevail across the board while continuing to offer cometitive pricing to customers.

For IndyAir a case could probably be made that they're offering some fares well below cost, but they're probably the only one - at least on the east coast. As for the others, that's what's missing from your charge. Just selling tickets for less is not predatory - you have to price below cost, preferably well below cost, for the charge to have substance.

On the other hand, have you looked at the yields on some of the fares US has offered this year? If they weren't so obviously used to keep cash coming in, they would be a textbook example of predatory pricing....purposely losing money in a market over the short term in order to offer enough cheap fares to drive a competitor out of business or out of the market.

Jim

ps - on AMR - they did try to institute "value pricing" - a simplified milage-based fare structure - in the early 90's (91 0r 92 IIRC), but no one went along and the effort died.

[post="269646"][/post]​

 

[UseYourHead]

Tom,

I agree with the gouging example it happens and it is wrong, the sad thing is that it only drives away customers in the end.

Having said that, what I said earlier is true, there are airlines that smell blood and circle (right now US Airways) with below cost fares in an effort to weaken and kill the airline.

Gouging was /is wrong, and so is that pratice. I understand that consumers have no sympathy, but it still does not make it right, IMHO.

Predatory pricing? Give me a break! The occasional sale fare might be as low as 50% below cost.

If you want to complain about pricing to the DOJ how about gouging. Airlines routinely and blatantly engage in pricing activities that, in other industries, are illegal. If your local gas station were to attempt to price gas the way US prices monoply routes (try PIT/MHT for an example) the owner would be cooling his heels for a good long time. This, more than anything else, is why the legacy airlines are in the bind they are in and why no consumer feels any sympathy for them.

[post="269680"][/post]​

 

[BoeingBoy]

I agree Jim,

There is blame to go all around on this subject. They do it to us, we in BK do it back, it seems to be an endless cycle.

At some point you would hope the crazyness moderates and some sensible money making policies prevail across the board while continuing to offer cometitive pricing to customers.

[post="269700"][/post]​

Except that you can't blame that on the LCC's (other than possibly FlyI, and they're doing the same thing we have been - keeping cash flowing at any cost). Take a look at WN's or B6's fares sometime. At the bottom end they price at about cost - it's just that their costs are low enough that they can break even at those fares where we lose money.

If by "crazyness" you mean the LCC's pricing enough above their cost for US to make money, you'll have a long wait for that to end.

The other legacies - interesting that they almost universally have done better in operating results than we have when you adjust for size. So if they're underpricing to kill us at any cost it hasn't shown up in the operating results.

Jim

 

[UseYourHead]

Jim,

You don't think that SWA prices below cost when they start markets in our hubs, or that they do not raise prices as much as they would if we were not there?

How about Delta, you don't believe they have been pointing underpriced capacity at us for years (since Gangwal times)?

Or NWA as they come into say ERI or IND?

Since I have worked in the industry (1978) the airlines have always done things like this. And when Braniff, Eastern, PanAm, etc. were in financial trouble they were attacked from all sides by capacity at near or under cost while the attacking airlines subdized the losses somewhere else in the route system.

FWIW I believe we are going through exactly the same thing.

It is true that many of SWA/JBLU fares are very low and either near cost or minimaly profitable.

Except that you can't blame that on the LCC's (other than possibly FlyI, and they're doing the same thing we have been - keeping cash flowing at any cost). Take a look at WN's or B6's fares sometime. At the bottom end they price at about cost - it's just that their costs are low enough that they can break even at those fares where we lose money.

If by "crazyness" you mean the LCC's pricing enough above their cost for US to make money, you'll have a long wait for that to end.

The other legacies - interesting that they almost universally have done better in operating results than we have when you adjust for size. So if they're underpricing to kill us at any cost it hasn't shown up in the operating results.

Jim

[post="269703"][/post]​