Northwest Kills fare hike...Why???


Jan 20, 2003
WSJ: Northwest Airlines kills industrywide fare hike
An attempt by major airlines to raise fares $20 per round-trip ticket fell apart over the weekend as Northwest Airlines refused to go along, The Wall Street Journal is reporting Tuesday.
The fare increase was launched by Northwest''s marketing partner, Continental Airlines, which raised prices Friday on both leisure and business tickets.
At least seven other carriers raised prices in step with Continental. But by Sunday night, with Northwest unmoved, both American Airlines and United Airlines rolled back their prices. By Monday morning, all airlines had rolled back prices.
Northwest operates three daily nonstop flights out of Piedmont Triad International Airport.
The fare jockeying marked the third failed attempt to raise prices in the past 60 days. Houston-based Continental said Friday that it needed higher prices to help cover the higher cost of jet fuel, which is the second-largest expense for an airline after labor. The company said recently in a Securities and Exchange Commission filing that it is losing $1.5 million a day in the first quarter.
The nine U.S. majors suffered net losses of more than $11 billion last year and red ink is expected to continue this year, especially if a war with Iraq keeps travelers at home.
To fill empty seats carriers have had to resort to widespread discounting, bringing fares to 15- to 20-year lows.
I agree that, most likely, NW feels that it gains more revenue by selling a higher volume of cheap tickets than it would by selling fewer tickets at a slightly higher fare--in other words, the loss in revenue caused by people opting not to fly at higher fares would offset any gain resulting from the increase.

But here's another theory: as NW, CO, and now DL continue to develop their relationship, the last thing NW wants is to be accused of price fixing. If, at some point down the road, the DOJ thinks that something fishy is going on, NW can now point to more than one occasion on which it did NOT match CO's fares. I could be way off base, but it's just something that crossed my mind.
From what I understand, NW did match the initial price increase, but only on the routes and tickets (mostly cheaper) that would support it. NW kept the price the same on the expensive tix because if UA is $1520 LAX-NRT and NW is $1500...that is a lot of jack to lose/gain for just a $20 increase (I don't have any #s to support this, but this is how I understand it).

Then it all fell to pieces. A week later when NW knew that the industry would jump at any price increase, NW hand picked the routes they felt that would give them the best advantage price/marketwise and put the most pressure on the rest of the industry.

NW could also be trying to run UA out of the industry. UA is on the ropes, and if they can undercut their market...maybe something will give there in Elk Grove. That would be a good thing for NW.

I also read a small blip about what these airlines do is increase these tix, then, days before the flight, dump some for cheap on hotwire...if that is the case, why not try to get a couple more sales at $200 instead of $220 and then having to post the unsold ones on hotwire?
>> An attempt by major airlines to raise fares $20 per round-trip ticket fell apart over the weekend as Northwest Airlines refused to go along, The Wall Street Journal is reporting Tuesday.
On 3/7/2003 6:39:08 PM glasspilot wrote:

And then NW turns around an asks employees for concessions??? Does this make sense to anyone???


Northwest has two labor contracts it is about to negotiate. Northwest always poor-mouths before contract talks, no matter if it is good times or bad times in the airline industry.