USA320Pilot
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- May 18, 2003
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US Air-Delta merger could ignite fare war: experts
- Thread starter USA320Pilot
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You know, this is the 4th story I've seen that says something to the effect of "could create a bidding war" "could lower fares" "could raise fares" wow..
Exactly. I never understood how people think this merger would raise fares sky high. Relax. In the world of WN, B6 and FL etc...., that aint never gonna happen again..... :blink:
As far as the smaller cities that would lose competition (ie AVL in the article), aren't those fares higher already? I cant see the fares going higher with this new pricing system that the former HP execs say has already dramatically lowered fares throughout the East, as they did on the West years ago.....
Interesting.
longing4piedmont
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- May 19, 2003
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Yep, now we are calling travel agents at myvacationpassport.com experts. :blink:
Dog Wonder
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Any fare wars would only be designed to put the real LCCs out of business.
ringmaruf
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I wasn't taking it to mean a "fare increase" per se, so much as not putting as many seats in the cheaper buckets.
I guess that's more or less the same thing, though the cheaper fares should still be published if you plan ahead.
(Plus, of course, some of the additional revenue will come from network benefits from better connectivity and more points in the network and such.)
I'd note again that it's by no means a coincidence that US has recently cut fares to much fanfare at HTS and AGS, two of the six cities where US and DL are the only carriers, no doubt to attempt to win community support at those cities, and to cast themselves as being low fare.
I also don't think, though, that they will raise fares a ton in any event--it's not like DL and US have been particularly aggressive about pricing in the smaller markets to begin with.
BoeingBoy
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- Nov 9, 2003
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Agreed, though as you say less of the cheapest seats means higher average yield overall.
Ironically, the proposed DL merger is almost the mirror image of the US/HP merger - at least where the revenue gains are supposed to come from.
US/HP revenue synergies were due almost entirely to increased connectivity and the combination serving more markets than either separately.
New US/DL, on the other hand, has most of the increased revenue coming from reduced competition - almost no domestic markets will be served by the combined carrier that aren't served by both now. US will obviously gain access to additional international markets, but they're already served by DL so how much additional traffic will be generated for those flights?
Finally, those new low fares that we've announced say more about how much legacy US charged than anything else. At the lowest (restricted, non-refundable, two week advance purchase, etc) they produce aa high or higher yield than WN's average yield (and quite a bit higher than their lowest fare yield). Walk up fares of over $1/mile seem to be the norm in these "new low fares" announcements.
Jim
ClueByFour
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- Aug 20, 2002
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This is the largest load of bovine fecal matter I've seen on point yet.
Of course fares are going to go up--Kirby and Doogie all but admit that's the entire point of the merger. B6 is not going to fly to AVL anytime soon.
Of course fares are going to go up--Kirby and Doogie all but admit that's the entire point of the merger. B6 is not going to fly to AVL anytime soon.
Less competition, or removal of excess capacity?
Fares to places like AVL are already high! How much higher do you think they will go when they have flights to CLT and ATL on DL, instead of US and DL? My guess, is not much.
You don't think the LCC's will go into smaller markets anytime soon? Maybe not AVL per se, but those B6 E190's need to go somewhere! Wouldn't surprise me to see B6 in places like AVL. For comparison, I wonder how AVL compares to a market like BTV? B6, as well as most LCC's, have a funny way of stimulating traffic in places we never thought they would succeed....
Just my .02, aint worth much...
So you believe that this will allow for skyrocketing fares in places such as AVL, for example?
BoeingBoy
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Skyrocketing? I guess that depends on one's definition.
The numbers in the powerpoint indicate something on the order of 3 to 3.5%.
As ringmaruf pointed out, it would probably not mean higher fares per se - all fares going up that much (other than increases in line with other variables such as fuel price, industry fare increases, etc). It probably would mean a higher average fare - a smaller percentage of seats sold at the lower fares and a higher percentage sold at the higher fares, thus raising the average fare paid by that 3 to 3.5%.
Jim
The numbers in the powerpoint indicate something on the order of 3 to 3.5%.
As ringmaruf pointed out, it would probably not mean higher fares per se - all fares going up that much (other than increases in line with other variables such as fuel price, industry fare increases, etc). It probably would mean a higher average fare - a smaller percentage of seats sold at the lower fares and a higher percentage sold at the higher fares, thus raising the average fare paid by that 3 to 3.5%.
Jim
Perfect. Exactly what the industry needs. So where is the problem?
It seems to me the main point of apprehension with a proposed merger such as US/DL, is that it would make fares skyrocket, yes skyrocket (
), in smaller cities where DL and US currently operate side by side. Assuming the fare fluctuations with regards to fuel price and other variables, do we really see these doomsday predictions coming true if DL/US combine? I do not believe 3- 3.5% fare fluctuations is anything more than adjustments for fuel price/ industry fare increases, etc... What am I missing?
BoeingBoy
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Nothing, as long as you're not on the paying end....
You'll notice the word I kept repeating - average. Some markets, mostly those with lots of LCC competition, would see little or no fare increases.
Others would see larger fare increases. Care to guess which ones? Primarily those with little or no other competition, like AVL.
It's no different than what exists in PHL & CLT now. At PHL, US has something like 50% market share (and a fair amount of LCC competition) while at CLT it's more like 80% (and little LCC competition). Average fares at CLT are quite a bit higher than at PHL.
That seems to be the primary revenue case for this merger - absorb a competitor, thus increasing market share, thus allowing for higher average fares. As you have so aptly pointed out, other partners (like NW) are more attractive from the standpoint of increasing our reach into new markets.
Jim
