Predatory Pricing

[mweiss]

At 12¢/mi, and 4,804 miles round-trip, the cost is $576.48. 'Course, the cost is more like 13¢, pushing it up to a little over $600.

 

[mbmbbost]

And if all airlines are required to price their product at cost, what in the world is USAirways doing charging $176 RT between PHL and LAX? At a CASM of around 12 cents, that seat is probably costing them close to $700 to produce.

Who says the cost per seat mile PHL/LAX is 12 cents or 13 cents? I thought that was the average CASM systemwide.. It doesn't seem to make much sense to apply these figures to specific routes, especially long-haul.

 

[BoeingBoy]

mbmbbost,

You are obviously right. The CASM for a particular route is unknown to us outside of CCY (hopefully, someone there knows the answer). So we're left with the average mainline CASM.

mweiss has done some looking at adjusting CASM for stage length. My guess is that there's 1 to 1-1/2 cents difference in CASM between our average stage length and a transcon.

Additionally, you have to adjust for aircraft type if you want to be more accurate. The transcons are flown with the lower cost aircraft (though admittedly the higher cost of the 737 is partly due to average stage length again).

Jim

 

[mweiss]

Who says the cost per seat mile PHL/LAX is 12 cents or 13 cents? I thought that was the average CASM systemwide.

Good point. Unfortunately, according to Unisys, US's long-haul is about 12¢/mile. Short hops like PIT-PHL are a whopping 15¢!

 

[mweiss]

(though admittedly the higher cost of the 737 is partly due to average stage length again).

That, and the way Jim hot-rods it.

 

[BoeingBoy]

First you exposed the secret that point 2 point flights are started by us getting lost, and now this. Is no secret safe????

 

[mweiss]

😳 Was I not supposed to share that one, either?

 

[BoeingBoy]

Just keep quite about the wild orgies in the 5-star hotels at exotic locales.

And the free drinks at the hotel bar that we're entitled to.

Oh, yeah, and the personal "maids" that come with the Captains' penthouse suite.

Jim

 

[mweiss]

Just keep quite about the wild orgies in the 5-star hotels at exotic locales.

Hey, I saw Catch Me if You Can! 😀

 

[usair_begins_with_u]

Predatory Pricing

A company engages in predatory pricing when it sets the price of its goods very low in order to eliminate its competitors and prevent new companies from entering into the marketplace.

First, it's very tough to prove. Usually it involves pricing below contribution margin, a tell tale sign a company may be engaged in predatory pricing. Unfortunately for Uair, most of the LCC have the cost structure to cover their variable costs at very low fares. Otherwise, you cannot simply punish firms for being more efficient, as efficiency is not predatory.

I have to admit, its quite ironinc and slightly asmusing seeing these large carriers drop the P word on the LCC's.. Its the epitome of the pot calling the kettle black.

 

[mbmbbost]

Unfortunately, according to Unisys, US's long-haul is about 12¢/mile. Short hops like PIT-PHL are a whopping 15¢!

That's pretty interesting. It kind of puts a different light on increasing the long-haul flying that many of us talk about, when fares on much of it are not correspondingly higher.