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DOJ still considers AMR predatory pricing suit!
- Thread starter Diesel8
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Why is it that when AA engages in a fare war with a low cost, the DOJ get's all mad, but when a low cost engages in a fare war against the already delicate full service carriers, no one says anything?
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On 9/24/2002 3:29:01 PM s80dude wrote:
Why is it that when AA engages in a fare war with a low cost, the DOJ get's all mad, but when a low cost engages in a fare war against the already delicate full service carriers, no one says anything?
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Usually when a low-cost airline engages in a fare war, they still keep their fares at a level that they can make money. Hence, they are doing nothing illegal or predatory. WN and the like don't start new routes or lower fares simply to drive out the other majors, they do it because they see new opportunities to make money.
The full service carriers (do any full service carriers still exist?) have been accused of pricing below cost in order to drive low-fare carriers out of business. Flying money losing routes simply to drive out another competitor can be considered predatory....though the DOJ has had a hard time really pinning down the definition.
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On 9/24/2002 3:29:01 PM s80dude wrote:
Why is it that when AA engages in a fare war with a low cost, the DOJ get's all mad, but when a low cost engages in a fare war against the already delicate full service carriers, no one says anything?
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[/blockquote]
Usually when a low-cost airline engages in a fare war, they still keep their fares at a level that they can make money. Hence, they are doing nothing illegal or predatory. WN and the like don't start new routes or lower fares simply to drive out the other majors, they do it because they see new opportunities to make money.
The full service carriers (do any full service carriers still exist?) have been accused of pricing below cost in order to drive low-fare carriers out of business. Flying money losing routes simply to drive out another competitor can be considered predatory....though the DOJ has had a hard time really pinning down the definition.
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On 9/24/2002 4:16:54 PM DLFlyer31 wrote:
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The "full service carriers" (do any full service carriers still exist?) have been accused of pricing below cost in order to drive low-fare carriers out of business. Flying money losing routes simply to drive out another competitor can be considered predatory....though the DOJ has had a hard time really pinning down the definition.
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The DOJ is determined to create a new law by having the courts rule that merely matching not undercutting a competitors price, is preditory. The DOJ has a tough road ahead of them. Meeting your competitors price even if it results in a loss is a fundamental part of Free Market Economics. Not to mention how it went over like a lead balloon in a Courtroom the DOJ venue shopped for!
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On 9/24/2002 4:16:54 PM DLFlyer31 wrote:
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The "full service carriers" (do any full service carriers still exist?) have been accused of pricing below cost in order to drive low-fare carriers out of business. Flying money losing routes simply to drive out another competitor can be considered predatory....though the DOJ has had a hard time really pinning down the definition.
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The DOJ is determined to create a new law by having the courts rule that merely matching not undercutting a competitors price, is preditory. The DOJ has a tough road ahead of them. Meeting your competitors price even if it results in a loss is a fundamental part of Free Market Economics. Not to mention how it went over like a lead balloon in a Courtroom the DOJ venue shopped for!
Usually, AA Legal knows when to hold 'em and when to fold 'em. AA hasn't even tried to settle, which tells me they're convinced the lower court ruling will be upheld.
ITRADE
Veteran
[P]
[BLOCKQUOTE][BR]----------------[BR]On 9/25/2002 10:21:48 AM KCFlyer wrote:[BR]AA's problem wasn't that they matched fares - it was that they matched fares and the increased frequency, both of which disappeared about the same time that the smaller carrier ceded the market to AA. [BR][BR]Notice that they didn't mention Legend in the article. AA's actions against Legend may have looked predatory, but IMHO, those actions were purely competitive. [BR][BR]Delta does a pretty nice job of matching AirTran's prices on competing routes out of ATL, but they don't seem to flood the market with flights, only to pull them when the low cost threat backs away.
[P][/P]----------------[/BLOCKQUOTE]
[P]Yah....The crux of the problem is as follows:[/P]
[P]AA does not serve A to B or serves A to B using 34 seat SF-340s (3x daily) at $250 a seat.[/P]
[P]Carrier X announces 737 service between A and B (4x daily) at $99 a seat.[/P]
[P]The day after the announcement, AA announces service from A to B using 140 seat MD-82s (5x daily) at $99 a seat.[/P]
[P]The battle rages for four months. After that time, Carrier X announces cessation of A to B service.[/P]
[P]A week later, AA quietly announces, or does not even announce, the cessation of A to B service or reduces service back to 3x SF-340 flights, and, at the same time, raises fares back to $250 a seat.[/P]
[BLOCKQUOTE][BR]----------------[BR]On 9/25/2002 10:21:48 AM KCFlyer wrote:[BR]AA's problem wasn't that they matched fares - it was that they matched fares and the increased frequency, both of which disappeared about the same time that the smaller carrier ceded the market to AA. [BR][BR]Notice that they didn't mention Legend in the article. AA's actions against Legend may have looked predatory, but IMHO, those actions were purely competitive. [BR][BR]Delta does a pretty nice job of matching AirTran's prices on competing routes out of ATL, but they don't seem to flood the market with flights, only to pull them when the low cost threat backs away.
[P][/P]----------------[/BLOCKQUOTE]
[P]Yah....The crux of the problem is as follows:[/P]
[P]AA does not serve A to B or serves A to B using 34 seat SF-340s (3x daily) at $250 a seat.[/P]
[P]Carrier X announces 737 service between A and B (4x daily) at $99 a seat.[/P]
[P]The day after the announcement, AA announces service from A to B using 140 seat MD-82s (5x daily) at $99 a seat.[/P]
[P]The battle rages for four months. After that time, Carrier X announces cessation of A to B service.[/P]
[P]A week later, AA quietly announces, or does not even announce, the cessation of A to B service or reduces service back to 3x SF-340 flights, and, at the same time, raises fares back to $250 a seat.[/P]
KCFlyer
Veteran
[P]
[BLOCKQUOTE]
[P][BR]----------------[BR]On 9/24/2002 6:24:51 PM AAmech wrote:[/P]
[P][BR]The DOJ is determined to create a new law by having the courts rule that merely matching not undercutting a competitors price, is preditory. The DOJ has a tough road ahead of them. Meeting your competitors price even if it results in a loss is a fundamental part of Free Market Economics. Not to mention how it went over like a lead balloon in a Courtroom the DOJ venue shopped for! [/P][/BLOCKQUOTE]
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[BLOCKQUOTE][/BLOCKQUOTE]
[P]AA's problem wasn't that they matched fares - it was that they matched fares and the increased frequency, both of which disappeared about the same time that the smaller carrier ceded the market to AA. [/P]
[P]Notice that they didn't mention Legend in the article. AA's actions against Legend may have looked predatory, but IMHO, those actions were purely competitive. [/P]
[P]Delta does a pretty nice job of matching AirTran's prices on competing routes out of ATL, but they don't seem to flood the market with flights, only to pull them when the low cost threat backs away. [/P]
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[P][BR]----------------[BR]On 9/24/2002 6:24:51 PM AAmech wrote:[/P]
[P][BR]The DOJ is determined to create a new law by having the courts rule that merely matching not undercutting a competitors price, is preditory. The DOJ has a tough road ahead of them. Meeting your competitors price even if it results in a loss is a fundamental part of Free Market Economics. Not to mention how it went over like a lead balloon in a Courtroom the DOJ venue shopped for! [/P][/BLOCKQUOTE]
[P][/P]----------------
[BLOCKQUOTE][/BLOCKQUOTE]
[P]AA's problem wasn't that they matched fares - it was that they matched fares and the increased frequency, both of which disappeared about the same time that the smaller carrier ceded the market to AA. [/P]
[P]Notice that they didn't mention Legend in the article. AA's actions against Legend may have looked predatory, but IMHO, those actions were purely competitive. [/P]
[P]Delta does a pretty nice job of matching AirTran's prices on competing routes out of ATL, but they don't seem to flood the market with flights, only to pull them when the low cost threat backs away. [/P]
I would agree with the frequency part of the argument if it was like double that of a so-called New Entrant, but most of the time it was only a flight or two. And even then in AA's case they aparently can show those flights drew enough consumer demand to justify to extra flights.
If I was Carty and the DOJ offered to settle for no more flights than the competition, I would give it a serious look. But even then it opens a whole new can of worms. Who is a New Entrant? How would these rules apply to someone like WN? Would they be forbidden from offering $19.00 fares or increased freq's when flying against B6? The potential cures could be worse than the supposed disese!
If I was Carty and the DOJ offered to settle for no more flights than the competition, I would give it a serious look. But even then it opens a whole new can of worms. Who is a New Entrant? How would these rules apply to someone like WN? Would they be forbidden from offering $19.00 fares or increased freq's when flying against B6? The potential cures could be worse than the supposed disese!
KCFlyer
Veteran
And one other thing...why in the world do these boards put . after every punctuation mark in a quoted post???
ITRADE
Veteran
[P]
[BLOCKQUOTE][BR]----------------[BR]On 9/25/2002 11:59:06 AM AAmech wrote:
[P]I would agree with the frequency part of the argument if it was like double that of a so-called New Entrant, but most of the time it was only a flight or two. And even then in AA's case they aparently can show those flights drew enough consumer demand to justify to extra flights[/P]
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[P] [/P]
[P]If customer demand was stimulated, then why the sudden retraction in the number of flights post-exodus of the startup. You'd think that if demand was truly stimulated the exit of the low-fare entrant would remain as there were now less seats available. However, despite the lack of seats, AA counterintuitively reduces its own number of seats.[/P]
[BLOCKQUOTE][BR]----------------[BR]On 9/25/2002 11:59:06 AM AAmech wrote:
[P]I would agree with the frequency part of the argument if it was like double that of a so-called New Entrant, but most of the time it was only a flight or two. And even then in AA's case they aparently can show those flights drew enough consumer demand to justify to extra flights[/P]
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[P] [/P]
[P]If customer demand was stimulated, then why the sudden retraction in the number of flights post-exodus of the startup. You'd think that if demand was truly stimulated the exit of the low-fare entrant would remain as there were now less seats available. However, despite the lack of seats, AA counterintuitively reduces its own number of seats.[/P]
KCFlyer
Veteran
[BR][BR]
[BLOCKQUOTE][BR]----------------[BR]On 9/25/2002 11:59:06 AM AAmech wrote:[BR][BR]I would agree with the frequency part of the argument if it was like double that of a so-called New Entrant, but most of the time it was only a flight or two. And even then in AA's case they aparently can show those flights drew enough consumer demand to justify to extra flights. [BR]If I was Carty and the DOJ offered to settle for no more flights than the competition, I would give it a serious look. But even then it opens a whole new can of worms. Who is a New Entrant? How would these rules apply to someone like WN? Would they be forbidden from offering $19.00 fares or increased freq's when flying against B6? The potential cures could be worse than the supposed disese![BR][BR]----------------[BR][BR]A couple of differences. Vanguard tried an MCI-ICT-DFW trip for a reduced fare. AA bumped up frequencies to DFW out of MCI and added frequencies (and jets) out of ICT. Vanguard quit the ICT-DFW market and AA made ICT pretty much an Eagle city again. They eventually shut down Vanguard on MCI-DFW, and when they did, those added frequencies just couldn't be justified...despite the fact that there were now fewer seats in the market with Vanguard's retreat. [BR][BR]Southwest is a different animal. When JetBlue started LGB to OAK service, Southwest was already running 57 flights between the LA area and Oakland. They didn't add any, hell, they didn't need too add any. And now that JetBlue has announced a cutback in their 9 daily flights, Southwest is still running their 57 flights. Charging $19 is a purely competitive move. [BR][BR]AA added about 5 daily departures to DFW out of MCI, and they didn't really need to do that...Vanguard only ran something like 3 flights a day, (early morning, noon, and late afternoon). AA had flights almost hourly - they already had a tremendous advantage in the convenience department, yet they added even more flights. Had they only matched the fares, I don't think the DOJ would have batted an eye. [BR][BR]Interesting thing though, if AA could prove that there was consumer demand for the lower fare flights, why would they have pulled the aircraft out of a market and raised fares to a point where demand dropped? Using the latest 10Q numbers, AA had CSM's of 11.8 cents. Wichita to DFW would have cost about $38 per ASM to operate. Had AA offered a $200 round trip on an MD80, they would have made money on a half full flight. Right now, it costs almost $400 to fly on an RJ. Wichita was BEGGING for low fare service - hell, that's why they had their senator modify the Wright Ammendment to include Kansas as a state that could fly into Love Field...they wanted Southwest, but they would fly whoever offered a fair price. Vanguard offered it, but as AA found, people went with AA because they matched the fare and were a known product. [BR][BR]Sure enough, $50 to Wichita was a money losing fare, but I believe that AA could have easily proven that while they weren't making money at that fare, neither was their competitor, so how can matching fares be construed as being predatory? [/BLOCKQUOTE]
[BLOCKQUOTE][BR]----------------[BR]On 9/25/2002 11:59:06 AM AAmech wrote:[BR][BR]I would agree with the frequency part of the argument if it was like double that of a so-called New Entrant, but most of the time it was only a flight or two. And even then in AA's case they aparently can show those flights drew enough consumer demand to justify to extra flights. [BR]If I was Carty and the DOJ offered to settle for no more flights than the competition, I would give it a serious look. But even then it opens a whole new can of worms. Who is a New Entrant? How would these rules apply to someone like WN? Would they be forbidden from offering $19.00 fares or increased freq's when flying against B6? The potential cures could be worse than the supposed disese![BR][BR]----------------[BR][BR]A couple of differences. Vanguard tried an MCI-ICT-DFW trip for a reduced fare. AA bumped up frequencies to DFW out of MCI and added frequencies (and jets) out of ICT. Vanguard quit the ICT-DFW market and AA made ICT pretty much an Eagle city again. They eventually shut down Vanguard on MCI-DFW, and when they did, those added frequencies just couldn't be justified...despite the fact that there were now fewer seats in the market with Vanguard's retreat. [BR][BR]Southwest is a different animal. When JetBlue started LGB to OAK service, Southwest was already running 57 flights between the LA area and Oakland. They didn't add any, hell, they didn't need too add any. And now that JetBlue has announced a cutback in their 9 daily flights, Southwest is still running their 57 flights. Charging $19 is a purely competitive move. [BR][BR]AA added about 5 daily departures to DFW out of MCI, and they didn't really need to do that...Vanguard only ran something like 3 flights a day, (early morning, noon, and late afternoon). AA had flights almost hourly - they already had a tremendous advantage in the convenience department, yet they added even more flights. Had they only matched the fares, I don't think the DOJ would have batted an eye. [BR][BR]Interesting thing though, if AA could prove that there was consumer demand for the lower fare flights, why would they have pulled the aircraft out of a market and raised fares to a point where demand dropped? Using the latest 10Q numbers, AA had CSM's of 11.8 cents. Wichita to DFW would have cost about $38 per ASM to operate. Had AA offered a $200 round trip on an MD80, they would have made money on a half full flight. Right now, it costs almost $400 to fly on an RJ. Wichita was BEGGING for low fare service - hell, that's why they had their senator modify the Wright Ammendment to include Kansas as a state that could fly into Love Field...they wanted Southwest, but they would fly whoever offered a fair price. Vanguard offered it, but as AA found, people went with AA because they matched the fare and were a known product. [BR][BR]Sure enough, $50 to Wichita was a money losing fare, but I believe that AA could have easily proven that while they weren't making money at that fare, neither was their competitor, so how can matching fares be construed as being predatory? [/BLOCKQUOTE]
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On 9/25/2002 12:00:44 PM AAmech wrote:
Can't they put a spell check on this board? PLEASE!!!
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Just write your articles in Word, do your spell and grammar checks there. Once completed, you simply cut and paste into the message board.
Otherwise, when it comes to spelling, as long as the gist of what's being said is understood, I don't think its any big deal.
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On 9/25/2002 12:00:44 PM AAmech wrote:
Can't they put a spell check on this board? PLEASE!!!
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[/blockquote]
Just write your articles in Word, do your spell and grammar checks there. Once completed, you simply cut and paste into the message board.
Otherwise, when it comes to spelling, as long as the gist of what's being said is understood, I don't think its any big deal.
To me (and any discerning person) it's a case of anti-competitive, predatory pricing on the part of AA (and other cartel airlines who do the same) with the intent of manipulating airlines out of markets in which AA had previously shown no interest.
Whether the technicalities behind which AA, DL and others hide will work for them in this case is for the DOJ and other elements of the legal system to decide. That, to me, however, isn't the main issue. The real issue, IMO, is that AA, DL and others are sinking themselves even deeper through their reactionary stupidity in their predatory pricing practices (whether or not the law defines it as such). They may gain short-term, low yield, non-profit market share while the lasting damage is only to themselves; no lasting damage is inflicted on capably managed, adequately capitalized low-cost competitors who are in synch with market realities.
Whether the technicalities behind which AA, DL and others hide will work for them in this case is for the DOJ and other elements of the legal system to decide. That, to me, however, isn't the main issue. The real issue, IMO, is that AA, DL and others are sinking themselves even deeper through their reactionary stupidity in their predatory pricing practices (whether or not the law defines it as such). They may gain short-term, low yield, non-profit market share while the lasting damage is only to themselves; no lasting damage is inflicted on capably managed, adequately capitalized low-cost competitors who are in synch with market realities.
Even if cutomer demand is stimulated and the route no longer has competition, there may be bigger fish to fry using that aircraft and crew to add another freq to LGA,LAX or ORD.
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