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Sean

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Aug 20, 2002
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American Airlines turns to customers to sell its fares
By CYNTHIA WILSON
Post-Dispatch
03/02/2003 10:15 PM
For months American Airlines has been trying to convince travelers, without much success, that its airfares are competitive with low-fare carriers such as Southwest Airlines and AirTran Airways.
Now the world''s largest carrier is turning to customers who recently flew the airline to help deliver the message.
The airline, based in Fort Worth, Texas, will launch a three-month advertising campaign today that features real travelers bragging about the low fares they paid to fly American and the benefits that came with their purchase.
American representatives spent three days in January asking randomly selected customers at their hub in Chicago what they paid to fly the airline and if the customers believe they got a good deal, said Rob Britton , director of advertising for American Airlines.
Of the 400 customers interviewed, 30 agreed to appear in television, radio and print ads, Britton said.
In the 30-second television spots that will make their debut in St. Louis and Chicago, customers yell out their names and the one-way fare ( they paid for tickets to places like New York, San Diego, Phoenix and Kansas City.
In two other spots, the passengers also talk about getting frequent-flier miles they can redeem toward travel to Paris and Hawaii, and that they had more room to stretch their legs during the flight. The commercials end with a spokesman saying, Next time, get a great, low fare and a lot more airline.
The campaign''s theme extends to newspaper ads and radio spots that include tips on how travelers can find low fares on the airline.
American is launching the ads in Chicago and St. Louis because the airline has a hub in both cities. The ads will begin March 31, in New York City, Los Angeles and on select national cable channels.
Last summer, American launched a newspaper and radio ad campaign to tell travelers that they could get more bang for their buck flying its international network. But American''s research shows consumers continue to believe it costs more to fly the airline, Britton said.
The mindset is costing American, which lost $3.5 billion last year, revenue to discount carriers who now compete with American on 82 percent of its flights in the U.S., Britton said.
Britton acknowledged that the perception of American''s pricing is partly driven by the higher fares passengers pay if they buy a ticket within 24 hours of their trip. But, he said, full-fare tickets, as they are called, account for less than 10 percent of American''s revenue.
The growth of the low-cost carriers over the last 10 years has crowded out the idea that incumbent carriers are not price competitive, Britton said. We really need to continue to chip away at the misconception in the marketplace that we do not offer low fares.
As speculation continues that American could join rivals United Airlines and US Airways Inc. in bankruptcy, Britton wouldn''t say how much American is investing in the campaign. But he called the investment substantial.
In addition to television, radio and newspaper ads, American will run ads on billboards, mass transit trains and bus panels, Britton said.
We have a business objective ... to make more progress convincing the marketplace that we are price competitive, Britton said.
 

KCFlyer

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Will they run a follow up ad asking folks who had their travel plans change how much value they got for the $100 change fee or lost value of the entire ticket. The ad may be a start, but "value" is more than legroom.
 

limit

Senior
Jan 3, 2003
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This is a step in the right direction. The change of the public’s perception towards AA is paramount to our success. Now lets make sure our service (at all levels) supports and strengthens the message.

It is difficult to understand why a customer feels he is entitled to change his travel plans without incurring a change fee, or forfeiting the ticket he/she did not use. What is the rationale behind this? If a company allows a customer to do so in order to match a competitors practice, it is understandable. If we remove this from the equation is there any justification for such an expectation?
 

KCFlyer

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[blockquote]
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On 3/3/2003 6:33:22 PM limit wrote:

This is a step in the right direction. The change of the public’s perception towards AA is paramount to our success. Now lets make sure our service (at all levels) supports and strengthens the message.

It is difficult to understand why a customer feels he is entitled to change his travel plans without incurring a change fee, or forfeiting the ticket he/she did not use. What is the rationale behind this? If a company allows a customer to do so in order to match a competitors practice, it is understandable. If we remove this from the equation is there any justification for such an expectation?

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One big one - an airline ticket is not transferable. I can resell or give my movie/sporting event/theatre tickets to someone who CAN use them if I can't go. Losing the entire value is a very last resort for that. An airline ticket is toast should ANYTHING happen...death or illness in the family, having second thoughts about a trip. Doesn't matter if you call the airline a month in advance to tell them, if you don't book something else (and pay the $100 change fee) by the original departure date - then kiss your money goodbye. Or, if you book the flight for a Monday departure and your business associate calls up later that afternoon to say that he really needs you to come in Sunday - BINGO a hundred bucks, even though you've only "owned" the ticket for a couple of hours.

The pricing is a good start. But burn a customer by charging a sh1tty change fee, and you may not see them again...is that worth a hundred bucks? Tell them they lose the entire fare and you might even lose their friends and family. Is that worth the piddly $200 the ticket cost? I'm not talking refunding the money...just KEEPING it and letting your customer use it towards another itinerary within a year. If they can't decide within a year...well that's the breaks. When someone finds out ahead of time they can't go, putting them under pressure to decide to go somewhere else by the original departure date is not terribly customer friendly...and you really want to be friendly to the customers that you have.

If a person calls you up a week before their trip and tells you that their father died and they can't go, does it give you the warm fuzzies to tell them that they really need to decide where they want to go on vacation within the next 7 days or else they lose the entire amount of their ticket(s)? You may call that "the rules of the game", but I call it "unconscionable".

Just last week, I went to Vegas. I changed my hotel reservation 3 different times. I wasn't penalized for doing that. I am not penalized for changing my rental car reservation. I'm not penalized for changing my dinner reservations. But an airline penalizes me for even thinking about changing my departure date.

THink of the customer as your friend...not the enemy. They'll thank you with repeat business. I think a lot of airline employees recognize this. Too bad that the powers that be still look for ways to screw them.
 

Cart Pusher

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Aug 20, 2002
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Very well spoken, limit. Thank you for speaking on behalf of most of us that are working in the industry.
 

limit

Senior
Jan 3, 2003
347
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We want and need to be a friend to our customers. I am grateful for all that choose to travel with us. I agree with you that you should be able to sell/give your ticket to anyone you choose but only for the date/flight issued (just like you can at the cinema), you should also be able to change it when an emergency occurs. And it is good business to allow the customer the use of his money for a predetermined amount of time as you suggest. The goodwill gained will be substantial. At the same time the company is not allowed to sell your seat to somebody else while you possessed that seat (2 minutes or two months). There are plenty of empty seats now I know, but isn’t this the reason you (and I) are allowed to change hotel reservations, rebook rental cars and so on?
I see it a little different because my interest is the financial viability of this company. How good is a business model/practice if it contributes to the company’s demise? This is a no win situation for the airlines. Damned if you do and damned if you don’t.
The perfect solution would be to sell a product at a reasonable price for a reasonable profit. This will not happen soon or at all. The customer is King and when it comes down to it; he is only loyal to his pocket (as I am). Not a criticism, just a hard realization of the facts and a large dose of frustration I suppose. This just emphasizes the overcapacity problem in the industry.
Thanks for flying with us if you do. We appreciate it.
 

KCFlyer

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Limit -please understand that I have never been upset with any of the service I have received on AA. If SWA doesn't fly where I'm going, AA is usually my first choice. The thing that really bugs me is that your managment (and the management of most of the other majors) seems to view the customer as the enemy. I don't think that people would abuse the system if penalites were eliminated. Southwest is the perfect example of that - you book a flight, you see the fare each way. If I change my departure date, I am "upcharged" to the most current one way fare without any penalty. The return stays the same. If I change my return, I am charged the difference between what I paid and what the current going rate is. You still make money (more money) and the customer does not feel like he's been bent over because he made a change. Anyone buying a ticket 21 or more days in advance isn't going to make a habit out of cancelling their plans outside of something unforseen happening, but if their plans did change, it would be nice if they had a little time to decide where and when they could use what they've already paid you.

And the recent "Reduced walk up fares" offered by AA and the others are still laden with change fees and penalties. When I travelled for business quite a bit, we rarely came home on the flight we were scheduled on. This was also in the days before the "change fees" were implemented. So we paid up the difference and all was well. How does your management think a business, large or small, is going to react when what they thought was a full fare last minute ticket is charged a fee because their client needed them to stay another day, and they had to pay a hundred bucks to change the ticket?

Again, my beef about lack of value or treating the customer as the enemy is not directed toward the line employees of AA or any other airline - it's directed at their management. You folks - all of you, regardless of the airlines you work for - do a fantastic job. It's the policies you have to live under that are causing problems. Good luck to you all.
 

SANman

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Feb 3, 2003
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This goes both ways though - I've been burned many times on Southwest by the being "upcharged" to the most current one way fare without any penalty. Inside 7 days before departure, Southwest doesn't have anything other than their full fare. So, for example, when I changed my ticket to ABQ last November, I was charged $130 to do so (the difference between half my round trip ticket and the one-way fare). If I'd changed both directions inside that week, I'd have incurred that charge twice. Obviously it's not as big of a deal if I'm going to LAS and the full fare is only $100 one way, but there are "penalties" even on Southwest. On AA, if the space is available I just pay the $100 to change it - even if I change both outbound and return.

As to the new "recent walk up fares" KCFlyer referenced, I'm a little curious... I'm pretty sure that if I buy the old one-way fare to Dallas at $1000 or whatever, it's fully refundable. If I drive up to LAX, I can get the new walkup for $650, and it's also fully refundable.
 

KCFlyer

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[blockquote]
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On 3/4/2003 12:56:40 PM SANman wrote:

This goes both ways though - I've been burned many times on Southwest by the being "upcharged" to the most current one way fare without any penalty. Inside 7 days before departure, Southwest doesn't have anything other than their full fare. So, for example, when I changed my ticket to ABQ last November, I was charged $130 to do so (the difference between half my round trip ticket and the one-way fare). If I'd changed both directions inside that week, I'd have incurred that charge twice. Obviously it's not as big of a deal if I'm going to LAS and the full fare is only $100 one way, but there are "penalties" even on Southwest. On AA, if the space is available I just pay the $100 to change it - even if I change both outbound and return.

As to the new "recent walk up fares" KCFlyer referenced, I'm a little curious... I'm pretty sure that if I buy the old one-way fare to Dallas at $1000 or whatever, it's fully refundable. If I drive up to LAX, I can get the new walkup for $650, and it's also fully refundable.
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SANman - you weren't burned by Southwest - you were charged the going rate. Make a change from an advance purchase fare on AA and you'll pay a hundred bucks plus any fare difference. All I am saying is if AA adopted a pricing policy similar to to Southwests, it wouldn't leave such a bitter taste in one's mouth...what would piss you off more:

1. changing plans with less than seven days to go and paying an upcharge in the fare to the "last minute" fare,

2. changing plans with less than seven days to go and paying a hundred bucks, plus an additional $130,

3. changing plans with less than seven days to go and finding out and being charged a hundred bucks but being told that today's your lucky day because there are still a few seats left that meet the rules of the advance fare you had...That's not a good situation for AA as it means the cabin must be pretty empty.

And yes, the many of the "last minute fares" hold the hundred dollar penalty. AA has a smokin' last minute deal from MCI-LAX - $308 roundtrip (note to management - you are losing money on this fare). Here are the detailed fare rules (pardon the "shouting", but this is a cut and paste from the AA website):

CANCELLATIONS TICKET IS NON-REFUNDABLE. NOTE - IF ANY PART OF THE TICKET IS UNUSED IT HAS NO VALUE AFTER TICKETED DEPARTURE DATE. CHANGES CHARGE USD 100.00 FOR REISSUE. NOTE - ON/PRIOR TO TICKETED DEPARTURE DATE OF EACH FLIGHT/ CHANGES ARE PERMITTED - USD 100 CHANGE FEE APPLIES. CHANGES REQUESTED AFTER THE TICKETED FLIGHT DATE ARE NOT PERMITTED AND THE TICKET HAS NO VALUE. --- FARE DIFFERENCE AND CHANGE FEE MUST BE PAID AND TICKETS MUST BE REISSUED AT THE SAME TIME A VOLUNTARY CHANGE IS MADE. --

In my example, you all are trying to "out Southwest Southwest". The last minute MCI-LAX fare on SWA is $600 round trip. Of course, it IS fully refundable...but the fully refundable fare on American is only $460 - you don't have to prove to anybody that you can charge less than Southwest - you need to make money and you are only hurting yourselves by charging a fare that won't cover your costs...the consumer will then EXPECT that fare to stay the same. Trying to undercut the LCC's prices, and asking labor to give up some of their wages to make that fare profitable is ass-backwards.
 

SANman

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Feb 3, 2003
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All true. In my example, I tried to standby for my WN flight to ABQ all of 90 minutes before my ticketed flight, but I was not allowed to do so without upgrading to the then-applicable full fare. My time is valuable, but not so much that I'd rather save the money and work at the airport.

In any event, the best thing I can gain from your MCI-LAX example is that this is just more proof that the pricing in this industry is nothing short of a disaster. In isolation it sure looks like AA is trying to "out-Southwest Southwest," but if you look on Orbitz the reality is that every major has this fare structure. WN doesn't give a hoot what anyone else's pricing is, especially not in a market where they're the only nonstop.

It seems to me that in markets where they're direct competitors, AA and WN are matched exactly. Same prices, same rules, same refundability, and same no change fee on the walkup fares.
 

SANman

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Feb 3, 2003
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The key word there though is that they're *indirect* competitors. AA's direct competition on the MCI-LAX route is competing connecting service on UA/DL/CO/NW/HP/etc, and that's who they're matched with on pricing. It's the rule more than the exception for the the connecting carrier to undercut the nonstop carrier - that's what the majors are doing in this market vs WN. AA undercuts WN all the time - SAN-AUS comes to mind as a personal favorite. HP and Frontier undercut AA all the time on their connecting service from DFW to the west coast.

But I digress. You're absolutely right that the WN pricing model is simple and straightforward, and makes sense to the customer. All the complexities built into the AA/major airline pricing model are designed to protect that elusive full fare which no longer exists. They all have Saturday night stays, or big AP hurdles, or some other fence to protect that full fare.

The problem with adopting the simplified fare structure is that you likely have to permanently give up on the true full fare (which I think has already happened anyhow). In order to make that work with today's cost structures, you have to raise the bottom end of the fare structure up. And that can't happen as long as there's competition priced lower than you. I would never begin to argue the logic side of the pricing. Logic's been missing from this industry for decades.
 

KCFlyer

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Except that AA does compete indirectly with LUV on MCI-LAX. Remember not too long ago when the other guys (AA included) implemented the "hundred bucks to stand by" rule? It didn't last too long because of the uproar caused by business. Southwest has always had the rule that you couldn't stand by for a flight without paying the full one way fare.

It's actually a very simple plan that SWA uses - there are advance fares, 7 day fares, and walkup fares...and the fare you pay is based on the advance time you buy the ticket. They also price by one-way segment. You can't tell what makes up your price on the other airlines...and you might well end up paying $400 for a ticket 2 weeks in advance, only to find that a "fire sale" is being conducted the day before your flight for $200. Implement a simplified pricing structure and stick with it.

Here's yet another example of AA's pricing....One way from MCI to LAX is $908 - DOUBLE the walk up round trip price. If AA decides that the unresticted round trip fare should be $500, it only seems logical that the one way fare should be $250. Unfortunatly, logic seems to be missing from the equation.