Golly Gee, that sure is charitable of Ma Delta. Keeping fares low in Mobile even though there's no "low-fare" competition there.
I thought fares were competitive in MOB in part because DL, UA, CO, US and AA alll compete there. Competition doesn't have to be "low-fare" to keep a lid on fares.
A return fare next Mon and Tue from MOB to LGA is $294++ on DL, UA and CO. AA and US want $419++ and $429++ respectively. The $258++ is a great fare for a business trip and even AA's and US' fares aren't outlandish for a Mon-Tue trip.
Looks like it's time for a discussion about how airlines price their markets.
Among the network carriers, it is pretty well understood within the industry that the carrier who has the highest market share sets the prices in the market.
Market share is calculated not only by city but also for every individual city pair and city is defined as airport to airport…. Ie. DFW-LAX, ATL-MCO, ORD-SFO
Note that market share is calculated by AIRPORT so that in markets such as MOB-LGA and MOB-EWR, the fare may very well be different because CO might have nonstop service in a EWR market but LGA is served on a connecting basis. Conversely, in a market like ORD-SFO and ORD-OAK, the competitive situation in each market is different and the pricing structure will reflect the different competition situation.
Every airline understands this pricing dynamic and has the tools to file and monitor fares based on an understanding of these principles obviously with the input of airline personnel since they choose how they want to price their markets. But vendors produce software that allows carriers to monitor their competitiveness in markets involving millions of fares and update the pricing systems within minutes after fares change.
Most US airlines file their fares through the Airline Tariff Publishing Company (ATP) which is an industry owned system that serves as the clearinghouse for fares which are then used to update the computer reservations systems, including the airlines own internal res systems. Domestic air fares can change up to 3 times per day; if airlines directly file their fares into their own res systems (which they can do), they can change continually.
Some airlines, esp. low fare carriers, do not participate in ATPCo but file their fares only on their internal systems. There are systems that scan the websites of these carriers and determine the pricing structures that exist.
The system of filing fares is highly complex involving the actual fare and a group of rules that apply to each fare. The chance of errors is fairly high and pricing errors are highly visible to the public…. There have been many stories of fares for $17 instead of $170 or application of winter season fares to peak summer flights.
International fares involve more complexities including currencies, IATA guidelines (where used), much more seasonality and directionality than domestic and a host of other factors.
The fares actually seen for a specific itinerary are a result of the interaction of the pricing and Inventory systems. While the pricing systems set the fare that COULD be available for any flight, it is the inventory systems (and the user inputs) that determine whether a specific fare is available on a specific flight and how many seats at that price are available, if any. Because these systems operate continuously, the fare on any given itinerary can change at any moment.
Returning to pricing individual markets...
Because each carrier has premium markets, including their key hub markets (the largest markets form most cities usually involve NYC and LAX and the largest local market by the largest carrier such as LGA-ATL), other carriers can easily change fares in another carriers key markets if that network carrier files a fare that another carrier doesnt like in its key markets.
Because each airline knows who owns a particular market (may involve a city or a specific market such as BNA-LAX (which is priced by AA and WN which have nonstop service, any deviance by one carrier from the norms of pricing result in a reaction from another carrier.
If AA files a fare in LGA-ATL for example below DLs lowest fare (specific to each category), AA will likely find a similarly low fare in DFW-LGA. This activity is often called sniping and it is well tracked by consumer advocates who love to point out these low fares which can be bargains- if you catch them fast enough.
Hub dominance makes it very easy for each carrier to enforce its preferred pricing structure in each market.
It is also why network carriers largely do not poop in each others backyards because they rarely win..
If a carrier actually flies the same route, such as LAX-ORD, then the dynamics change… but in this market, UA is the largest airline… and note how it has determine d its strategy for competing with VX and AA is forced to match UAs fares…for good or bad..... but because UA is larger, AA cannot get by without being competitive with the low fare carrier.
OTOH, many carriers choose to sister the fares in one city to those in another city…. Via a relationship that may involve anything from a direct duplication of fares to a premium on the dollar amount, or to variations on the fare rules (ie one way fares in one city might require a roundtrip with some type of minimum stay in another city). Traditionally fares were similar between all cities and largely based on mileage. As low fare carriers have increased their presence in the US, a patchwork of fare structures has grown, giving some cities cheaper air fares than others.
THIS IS THE KEY TO UNDERSTANDING THE SITUATION WITH CYCLIST.
If airlines did not make any attempts to keep fares in one city from becoming much higher than fares in a neighboring city, experience has shown that passengers WILL MOVE from one city to another. CVG is a very good example of how DL has continually adjusted its pricing strategy for CVG based on the fares that are offered at cities NEAR CVG, esp. since the most populated and richest suburbs of CVG are in the north of the city closer to DAY and CMH. There is enough technology plus old fashioned license plate counts at airports which are used to measure the amount of drive divert traffic to know how many people from one city are flying from another due to low fares. Airports that dont have low fare carriers constantly request help from the network carriers to prevent traffic from leaking from their airport to ones nearby that have do have them. In CVG, DL has experimented enough w/ the fare structure in CVG and has a pretty good idea of how much higher it can price CVG fares w/o losing traffic to nearby cities OTOH, it also knows what fares it needs in the local market in order to sustain the level of service it has.
It is often in the best interest of an airline and of the communities without a low cost carrier for the network carriers at the airport without a low fare carrier to have a pricing structure that is somewhat related to a nearby city that has a low fare carrier. If a network carrier isnt responsive to cities without network carriers, passengers will flee to cities that do have low fare carriers, and the small cities of the US will end up closing or having very limited and very high priced air service, with the low fare carriers in medium and large cities being able to grow at the expense of small cities.
Government, consumer groups understand this system which is related to the transparent, fast moving pricing system of the airline industry. Few other industries offer the ability for people all over the world to see the prices for a commodity/service of all players in a market at one time and then have those prices move as quickly as they do in the airline industry.
Airline pricing is much like the stock market in its volatility except that it involves an actual price or service. Unlike commodities prices (such as oil) which are highly volatile, consumers directly participate in the airline pricing process.
With that background in mind, lets return to the market in question...
As a city, DL has 53% of the MOB market, AA has 9% based on revenue. MOB fares are on average higher than PNS which is about an hour drive away close enough that history shows that passengers will drive for lower fares.
MOB is not served by any low fare carriers. PNS is.
DL carries 44% of the traffic from PNS and AA carries 15%.
FL carries about 14.5% of the passengers in/out of PNS but reduces fares in a number of markets, including ATL and the cities it serves on the east coast, almost all of which are competitive with DL.
If DL ignored FLs fares in PNS and did not have some pricing relationship between MOB and PNS, they could lose not only the passengers at PNS to FL but they could also lose passengers from MOB who would drive to PNS.
Specific to the PNS LGA market, DL has 67% of that market while FL has 17% with AA around 4%.
In MOBLGA, DL has 73% of the market, US has 14% and AA and CO each have about 6%. The average fare for all carriers in MOBLGA is about 20% higher than it is in PNSLGA, even thought the PNSLGA market is larger due to the low fare competition.
DL has determined that its revenue in both cities is best optimized by keeping as many passengers as possible in MOB.
Even though only PNS has a low fare carrier, MOB receives the benefits of having one because it is in DLs interests to ensure that MOB does not lose its viability as a source of passengers.
Every network carrier understands that, based on its share of the market, DL will set the fares in MOB to the east based on its size… if other carriers choose to lower their fares below DLs, the chances again are real high that DL will file a lower fare in one of those carriers strength markets.
Every network carrier has markets in addition to its hub markets where it expects to the pricing leader, even with respect to the low fare carriers that operate there.
In addition to their pricing strategies that are used for their hub markets, AA and CO have pricing models in markets throughout the southwest. DL has pricing models in markets throughout the SE and Midwest based on market strengths in each of those markets. UA… in certain cities in the Midwest, Rockies, and west… US in the east coast etc….
Of the hundreds of cities in the US that have commercial air service, less than 100 have low fare carriers operating there… how network carriers price the hundreds of smaller cities, including markets like PNS-SLC and PNS-PHX which have low fare carriers in both cities but the network carriers still carry the vast majority of traffic in that market. (in PNS-PHX, AA, CO, and DL carry the majority of traffic).
Network carriers have refined their pricing strategies for years based on their understanding of these principles which are based on solid, mathematical models which show how demand will shift based on pricing changes in each market.
So, no, DL isnt being generous to the people in MOB by offering low fares any more than AA or CO have fares that are $50 higher than WN in DFW and IAH to ORD compared to DAL and HOU to MDW…. AA and CO know exactly how competitive they need to be to WNs fares, even though AA and CO offer superior nonstop service to ORD which is closer to where more business travelers want to go.
Network carriers may not be able to control what markets a low fare carrier enters, but how competitive the network carrier is with the low fare carrier not only in the markets the low fare carrier serves but also in the markets near the airports served by the low fare carrier will determine how successful the low fare carrier will be with its service in a specific market and how successful other markets will be.
It is quite easy to predict how successful low fare carriers will be in a market based on the pricing and scheduling actions of other carriers in the market, including the largest network carriers in those markets. …..
Now I know this 2000 word reply will be of no interest to some and they can just move on…. but there are logical explanations for what exists in the airline industry and which define why carriers behave the way they do. I can also just about assure you that I will receive a note from someone thanking me for taking the time to explain things to them because I get those kinds of notes almost every time I write a long explanation like this.
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So, Cyclist, hopefully you now know why you got the MOBLGA fare you did and why DL and the MOB airport WANTS you to fly from MOB.
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And FWAAA,
there is plenty of proof that low fare carriers have a downward effect on fares... you need only look at ATL-FLL compared to ATL-MIA.
ATL-FLL is served by DL, FL, and NK. ATL-MIA is served by AA and DL.
Based on DOT data, the ATL-FLL market is almost twice as large as ATL-MIA but average fares are much lower in ATL-FLL.
The new terminal at MIA and its costs will help to serve as a barrier of entry for low fare carriers into the MIA market because such high terminal costs usually do not work with low fare carrier models.
FL tried to make ATL--MIA work without success.
ATL-MIA is similar to many other MIA markets - fares from MIA are much higher than they are to the same city from FLL.. thanks to the abundance of low fare competition from FLL but which is minimal in comparison at MIA.
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AA has determined there is more revenue to be made by NOT having a closer pricing relationship between MIA and FLL.
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Specific to your comment, it is possible that there may be markets which network carriers alone serve with lower fares than comparable markets which are served by low fare carriers, but those markets will be few and far between... I would be happy to see any lists of markets you could find that you believe have lower prices without a low fare carrier than in markets that do have them.
