US fares, particularly on indirect routings (eg.SEA-DTW) are higher. This appears to be based on the belief that (a) brand loyals looking to maintain status will pay them, or (B) with reduced capacity, pax with no alternative will pay them. With current load factors so high, the strategy might work. If, on the other hand, with those high load factors in place, profits fail to materialize after all those cuts in wages and services, then one would have to suspect that there may be discounting going on behind the scenes. The next round of financial results issued will be most interesting. From an anecdotal perspective, as I travel, I don''t see a lot of evidence that those seats in the front cabin are occupied by business people. Many flights still have G inventory on day of departure, suggesting a lot of junk in the back. That''s at variance with the published fares one finds.
It''s the Fares Stupid--Redux (Again)
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ClueByFour
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On 7/22/2003 5
21 PM X-U wrote:
Just out of curiosity, how many FFs out there pay for their business travel out of their own pocket? If it is your company paying for the fare, then they are the customer, you are the passenger. The customer and the passenger don''t always have the same criteria for what they are willing to pay for extra value.
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On 7/22/2003 5
21 PM X-U wrote: Just out of curiosity, how many FFs out there pay for their business travel out of their own pocket? If it is your company paying for the fare, then they are the customer, you are the passenger. The customer and the passenger don''t always have the same criteria for what they are willing to pay for extra value.
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*yawn*
My company used to have a pretty nice contract with US. Then, during BK, the US rep our travel folks deal with came out with the "no status on NR fares" routine and the "we will abrogate our contrract with you and all discounts on NR tickets are gone."
I''ve seen the numbers--it cost US something north of $1 million from my division alone--figure $5million for my company as a whole.
Corporations don''t see any "value" add in the current offering from any of the US majors.
I personally am free to choose the lowest available airfare for business travel, even if it''s somebody whom we don''t have a contract with.
My employer still gets a nice discount from US, but US has recently eliminated the discount on fares under $200. Big deal. A $200 fare would be great! 🙂
BTW, I have driven right past GSP to fly out of ATL or CLT on business when the fare savings, including driving cost, is significant. I am as careful with my employer''s money as I am with my own.
BTW, I have driven right past GSP to fly out of ATL or CLT on business when the fare savings, including driving cost, is significant. I am as careful with my employer''s money as I am with my own.
On 7/22/2003 4:18:05 PM JS wrote:
US charges high fares for mid-week travel because people actually pay it. Your example of paying $620 to fly ISP-MIA is an excellent example. Why on Earth would US lower the fare if you''re willing to cough it up?
Because extortion and gouging is bad business? It''s not exactly the way to build loyalty and repeat business...
The lower fares are paid by people who are price-sensitive. Raise the price and they will disappear --
You make it sound like a $1 fare increase will drive away everyone who isn''t happily paying full fares.
While they would sell a few more tickets on the high end if they lower the highest fares (e.g., ISP-ROC that you didn''t buy), it won''t make up for the loss on the low end.
A very few additional tickets sold at an adjusted "high end" would more than make up for potential losses at the low end.
It''s working for HP. It works for WN too...
Your reasoning defending the current fare structure reflects traditional thinking on the subject. In case you haven''t noticed everyone who prices that way is in deep financial trouble.
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On 7/22/2003 521 PM X-U wrote:
Just out of curiosity, how many FFs out there pay for their business travel out of their own pocket? If it is your company paying for the fare, then they are the customer, you are the passenger. The customer and the passenger don''t always have the same criteria for what they are willing to pay for extra value.
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On 7/22/2003 5
21 PM X-U wrote: Just out of curiosity, how many FFs out there pay for their business travel out of their own pocket? If it is your company paying for the fare, then they are the customer, you are the passenger. The customer and the passenger don''t always have the same criteria for what they are willing to pay for extra value.
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A better question might be how many airline employees pay market rates for tickets out of their own pockets?
Art at ISP
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We're missing the point here. HP is profitable after rationalizing their fare structure. I realize US costs are somewhat higher, but if we were to use the HP system as a model, with slightly higher fares in select markets (Note the word slightly NOT gouging), perhaps we'd have a chance.
The key word is balance, folks--the facts of the matter are that the current yield management and fare structuring is broken, and no one has the guts to fix it.
Something has to be done--they can't keep taking from the employees--you folks are the reason I stay--and I am very vocal about letting corporate know that!!
See my other post regarding PHL Monday night--the crew made a nightmare livable.
The key word is balance, folks--the facts of the matter are that the current yield management and fare structuring is broken, and no one has the guts to fix it.
Something has to be done--they can't keep taking from the employees--you folks are the reason I stay--and I am very vocal about letting corporate know that!!
See my other post regarding PHL Monday night--the crew made a nightmare livable.
RowUnderDCA
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Gee, isn't $620 r/t ISP-MIA a pretty reasonable mid-week fare? The kind that you guys scream about?
Isn't $2 hundred something r/t ISP-MIA mid-week the kind of lowest of the low fare (loss leader fare) that you complain about?
If not, they've got to be pretty close, right. Hey, there's plenty to complain about, and I'm not unsympathetic to your reasoning, but this example isn't your strongest. So are you advocating a new, reasonable sustaining rate system, are just trying to get more loss-making fares that you like?
Isn't $2 hundred something r/t ISP-MIA mid-week the kind of lowest of the low fare (loss leader fare) that you complain about?
If not, they've got to be pretty close, right. Hey, there's plenty to complain about, and I'm not unsympathetic to your reasoning, but this example isn't your strongest. So are you advocating a new, reasonable sustaining rate system, are just trying to get more loss-making fares that you like?
Art, if US were to use a discount carrier fare model, US would need a larger volume of passengers. The demand needed to support lower business fares does not exist in many US markets.
Take JetBlue for instance. They would never have served places like SYR or BUF if it weren't in exchange for getting slot exemptions at JFK.
When JetBlue gets the EMB-190, I bet that station #1 to be downgauged is SYR.
HP fares on the US system means saying bu-bye to little places like ISP and ROC.
Take JetBlue for instance. They would never have served places like SYR or BUF if it weren't in exchange for getting slot exemptions at JFK.
When JetBlue gets the EMB-190, I bet that station #1 to be downgauged is SYR.
HP fares on the US system means saying bu-bye to little places like ISP and ROC.
Art at ISP
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On 7/28/2003 2:05:14 PM RowUnderDCA wrote:
Gee, isn't $620 r/t ISP-MIA a pretty reasonable mid-week fare? The kind that you guys scream about?
Isn't $2 hundred something r/t ISP-MIA mid-week the kind of lowest of the low fare (loss leader fare) that you complain about?
If not, they've got to be pretty close, right. Hey, there's plenty to complain about, and I'm not unsympathetic to your reasoning, but this example isn't your strongest. So are you advocating a new, reasonable sustaining rate system, are just trying to get more loss-making fares that you like?
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On 7/28/2003 2:05:14 PM RowUnderDCA wrote:
Gee, isn't $620 r/t ISP-MIA a pretty reasonable mid-week fare? The kind that you guys scream about?
Isn't $2 hundred something r/t ISP-MIA mid-week the kind of lowest of the low fare (loss leader fare) that you complain about?
If not, they've got to be pretty close, right. Hey, there's plenty to complain about, and I'm not unsympathetic to your reasoning, but this example isn't your strongest. So are you advocating a new, reasonable sustaining rate system, are just trying to get more loss-making fares that you like?
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Row Under,
I am not complaining. I am not looking for more loss-making fares either. I have no problem with paying FAIR prices. I am advocating a new, reasonable sustaining rate system--a RATIONAL one. There is no acceptable excuse for charging someone $219 r/t ISP-LAX via PHL, but the guy next to him pays $800 to get off in PHL and fly home later that day. It makes NO sense!
I am NOT an expert in airline economics, but I AM a business man, and know how to structure a business. The airline business is the ONLY business I know of in which pricing has nothing to do with cost. It makes no sense. You don't need to offer 34 different fares in the same market. You DO need to offer value for the dollar.
Row, $200 in my opinion is a great deal--for ME, and like you said a loss leader for the airline. I am making more of an issue about the disparity than the actual number. I have paid $800 to/from FL midweek, and I have paid $158 for the same r/t on another week. If you offered a small number of seats for $99 fine, but it should be MAXXED out at around $249 one way. Let's assume that you have 150 seats to sell, and under current yield management you permit 25 seats to be sold for $99, and the range goes all the way up to $650 for the same seat. Lower the available number of the lowest fares to 10, and have progressive increases in 4 or 5 steps reaching a top of $249. I truly believe that the AVERAGE fare paid will go up, and that while some flights may still not be profitable, the losses will decline until eventually you can be somewhat profitable.
Raise the bottom, but lower the top--THAT's my point.
Also, I don't consider America West to be a true discount airline-they are a full service carrier (allegedly), and until they rationalized their fare structure, they were just as bad as the rest.
"Take JetBlue for instance. They would never have served places like SYR or BUF if it weren't in exchange for getting slot exemptions at JFK."
Not so sure about that, certainly not about Buffalo. BUF went from 400 pax a day total, to now a little over 800, IIRC. Now that is total enplanements, not just jetBlue.
Give people a good fare and they will travel. Now a family of four can travel from BUF to FLL and save enough money for hotel and entertainment, as opposed to previously.
Not so sure about that, certainly not about Buffalo. BUF went from 400 pax a day total, to now a little over 800, IIRC. Now that is total enplanements, not just jetBlue.
Give people a good fare and they will travel. Now a family of four can travel from BUF to FLL and save enough money for hotel and entertainment, as opposed to previously.
Art, the reason airline pricing has nothing to do with cost is because marginal cost is extremely low, due to high fixed costs.
The $220 "loss leader" fares are not really losses. The marginal cost (a little more fuel, a little more labor, and a can of soda) is nowhere near $220.
The objective of setting air fares is to maximize revenue. No one is going to pay US $800 to fly ISP-LAX roundtrip when Southwest will do it for $200, so that's why US has to charge only $200. Since Southwest and AirTran don't fly ISP-PHL, people will pay that much to fly to PHL since there is no other option.
The $220 "loss leader" fares are not really losses. The marginal cost (a little more fuel, a little more labor, and a can of soda) is nowhere near $220.
The objective of setting air fares is to maximize revenue. No one is going to pay US $800 to fly ISP-LAX roundtrip when Southwest will do it for $200, so that's why US has to charge only $200. Since Southwest and AirTran don't fly ISP-PHL, people will pay that much to fly to PHL since there is no other option.
Art at ISP
Veteran
JS,
I see what you're saying, but this assumption is wrong. We WON'T pay $800 ISP-PHL any more-I drive now.
I drove to Rochester earlier in the month for the same reason-it wasn't worth $600 to save a half hour (connections, etc.)
The gouging has to stop. $1000 LGA-CLT for a same day round trip is airway robbery. The reasoning is wrong-"just because we can". There has to be a fair and rational way to do this which provides value for all. I think many of my fellow frequent fliers would agree to pay a fair premium for the added value of a full service airline-I for one will never fly Southwest. If America West can do it and make a profit (they compete more directly with Southwest), then I have to believe U can do it too--with some adjustments for theur higher cost structure.
While I acknowledge the need to reduce costs, I question the methods used to reach that goal--the airplanes are filthy, the F/A's are more pressed due to in flight staffing reductions, the schedule cuts reduce the choices available to the business traveler. There are so many other ways to cut costs--if they had maintained the bag system in PHL, the belt problem might not have occurred-if they hadn't made irrational staff reductions, the misconnected bag situation might not have been so costly (millions to date?)
Dave has made the right move in giving back the 5%-now let's see him address the operational issues which are really affecting the bottom line.
I see what you're saying, but this assumption is wrong. We WON'T pay $800 ISP-PHL any more-I drive now.
I drove to Rochester earlier in the month for the same reason-it wasn't worth $600 to save a half hour (connections, etc.)
The gouging has to stop. $1000 LGA-CLT for a same day round trip is airway robbery. The reasoning is wrong-"just because we can". There has to be a fair and rational way to do this which provides value for all. I think many of my fellow frequent fliers would agree to pay a fair premium for the added value of a full service airline-I for one will never fly Southwest. If America West can do it and make a profit (they compete more directly with Southwest), then I have to believe U can do it too--with some adjustments for theur higher cost structure.
While I acknowledge the need to reduce costs, I question the methods used to reach that goal--the airplanes are filthy, the F/A's are more pressed due to in flight staffing reductions, the schedule cuts reduce the choices available to the business traveler. There are so many other ways to cut costs--if they had maintained the bag system in PHL, the belt problem might not have occurred-if they hadn't made irrational staff reductions, the misconnected bag situation might not have been so costly (millions to date?)
Dave has made the right move in giving back the 5%-now let's see him address the operational issues which are really affecting the bottom line.
