Us Airways Considers Slashing Fares

[GadgetFreak]

Rationalizing fares doesnt mean the lowest fares. It means creating a fare structure that provides a value to a set of consumers that will pay enough for that product to cover that cost and make a profit. Now the majors try to do this with a two tier system that averages fares at the right point (in theory) by combining very high and very high fares. One of the big problems is that despite the very complex fare structure, the combination of easy availability of information on the internet and increasing competition people buy the expensive fares much less often. US is out of cheap seats, okay try UA, AA, NW and if that doesnt work look at WN or B6. Or if you dont do that, teleconference if the ticket is too high. I dont fly LCCs so if I cant get a cheap fare on the majors I will not go. But cheap is based on some realistic expectations since I travel a lot. For instance, I have for the last few years had a couple meetings I should attend that are very close together in time and requires something like JFK-NRT-SFO (1 day stay in Japan)-ORD-RSW-ORD-LGA. I know Im not getting that cheap. It is sometimes near 3 grand. But I wont pay 5 grand for it and I wont pay 2 grand to fly to LA.

On the other hand, I would seldom flinch at paying 600 or 800 for a changeable, refundable fare on a full service carrier even if I could get it for 400 on JetBlue. Because I think the full fare carriers are worth more. But again, they arent worth say 5 times as much or more, as is often the case now. I dont think US has much to lose by dumping those 2 grand plus transcon fares. Not enough people fly them and they just scare people away who dont realize the wide variation in fares. US should dump the real cheap fares that they lose money on, and dump the real expensive ones that too few people fly and try to fill the planes with people paying more than the LCCs for better service on US. That really seems like the only chance they have. US will not beat Southwest and JetBlue in the discount market. Wont happen. They need to market a premium product successfully. This wont be easy however since I think a lot of flyers view the Southwest, and especially JetBlue products to be superior to the US product in addition to being cheaper.

 

[mweiss]

PITbull,

I think you're on the right track. Travel is inherently not a commodity, and it's about time the airlines stop treating it as if it were.

Economists would call your race to the bottom "convergence." Once a market reaches convergence, commodities end up being sold at the marginal unit cost, because there is no differentiation among vendors. As long as vendors are able to maintain differentiation, convergence is held back, and profits are available.

 

[mweiss]

...a lot of flyers view the Southwest, and especially JetBlue products to be superior to the US product in addition to being cheaper.

That's because of the classical definition of "quality" (which is getting the same thing consistently every time; the term has since been rebranded by marketers to refer to other things as well). I'll use the classical definition in this post.

WN has built a solid reputation for quality. It is rare that WN customers walk away feeling that they were delivered less than promised. It is common for US customers to walk away feeling that they were delivered less than promised. Why? Because WN promises a seat on a plane that will get you to your destination on time, with a drink and some peanuts along the way. US promises a specific seat on a plane that will get you to your destination on time, often with food, upgrades, movies, priority treatment for frequent fliers, etc., etc. along the way.

So WN has fewer "moving parts" that can go wrong. Thus there are fewer chances that the customer will walk away disappointed.

 

[GadgetFreak]

mweiss, I dont completely agree with this. I think you are right to a degree about the expectation part. However, I think the things that US doesnt deliver as well as WN are things like on time planes, baggage delivered, and friendly customer service. Those are the basics. Everyone has those moving parts. Some just move them better

 

[ErinSaoirseOBX]

Okay, maybe I'm an idiot, but what is the rationale behind pricing a flight from PHL to ABE, leaving Friday and coming back Saturday, at $964? I quoted that fare to a customer yesterday and he almost had a stroke. How can you justify this fare, let alone sell it?

The top 3 complaints we hear in res is:

"The fare sucks. How do you people stay in business?"
"The website sucks. Can you fix my reservation?"
"The IVR sucks. I hate pushing all those buttons just to get to a PERSON!"

If we're actually LISTENING to the customer, they don't give a fat frog's butt for a website that's the greatest technological breakthrough since the lightbulb. They want HUMANS! They want to talk to a PERSON! And they want a fair price. I don't understand why this concept should be all that difficult to figure out, business-wise. Again...maybe I'm an idiot...

 

[RowUnderDCA]

I don't want to talk to a human and I'm not a genXer. Well, maybe the oldest of genX.

Also, does anybody know if UAL will be unhappy with U's pricing? Do they have any recourse?