Predatory Pricing

[casual rat]

Southwest Airlines offers Pittsburgh routes

Southwest Airlines Co. has intensified its assault against bankrupt US Airways Group Inc., announcing plans Wednesday to offer service in Pittsburgh in May.

Analysts said the move could speed the demise of US Airways, the dominant carrier in Pittsburgh. The nation's seventh-largest carrier, which has been crippled by fare wars with Southwest and other airlines, has said that if it can't reduce labor costs, it could begin liquidation this month.

US Airways did not immediately return a call Wednesday seeking comment.

Remember when the Government intervened when AA and UA were accused of predatory pricing practices, as an affront to newer carriers gaining a toehold in the Marketplace? Didn't those carriers get fined and 'ordered' to stop this practice? What gives? This is nakedly transparent, so in the name of fairness, why doesn't Southwest enjoy the same scrutiny?

 

[Farley]

Southwest Airlines offers Pittsburgh routes

Southwest Airlines Co. has intensified its assault against bankrupt US Airways Group Inc., announcing plans Wednesday to offer service in Pittsburgh in May.

Analysts said the move could speed the demise of US Airways, the dominant carrier in Pittsburgh. The nation's seventh-largest carrier, which has been crippled by fare wars with Southwest and other airlines, has said that if it can't reduce labor costs, it could begin liquidation this month.

US Airways did not immediately return a call Wednesday seeking comment.

Remember when the Government intervened when AA and UA were accused of predatory pricing practices, as an affront to newer carriers gaining a toehold in the Marketplace? Didn't those carriers get fined and 'ordered' to stop this practice? What gives? This is nakedly transparent, so in the name of fairness, why doesn't Southwest enjoy the same scrutiny?

[post="236127"][/post]​

I'll take a stab at it: Because they are making money? Does that ring a bell?

 

[casual rat]

AA and UA were making money at that time too. So your point is?

 

[whlinder]

WN doesn't raise fares when the competitor leaves the market.

 

[Bob Owens]

AA and UA were making money at that time too. So your point is?

[post="236131"][/post]​

I think that predatory pricing is considered when one company prices a product at a price where they lose money and do so with the intent to drive out a competitor. AA and UA were accused of losing money on those routes where new entrants popped up and promptly raised the prices again once they killed off the start ups.

I think that the big guys won that case, its called competition. Who can lose the longest wins. Survival of the biggest. The city pairs effected I guess simply did not have the political clout to fight it.

The majors have been selling their tickets below cost for the last two years but instead of driving out competitors they are taking money away from their employees.

 

[mrfish3726]

NW has NEVER had predatory pricing! They still offer the same old $39 - $69 dollar fares that they always have. And as WHLINDER pointed out, when USAIR is done and gone in PIT NW won't raise their fares. Can't wait to see how long TED competes against NW with those $39 fares! UniTED management is plain fricking nuts!!!!

 

[funguy2]

My recollection is that there have been two major predatory suits:

1. When Reno Air entered the RNO-MSP market, NW, which at the time did not even fly to RNO, announced a minihub at RNO. I think Reno Air won an injunction against the "minihub" as NW never started it, but I believe NW did end up adding competing MSP-RNO service.

2. When AA match fares of Vanguard on DFW-ICT and DFW-MCI. While I thought that Vanguard had a strong case, since AA lowered fares until Vanguard pulled out and then raised them again, aparently they could not prove that AA lowered their prices below their costs, thus predatory pricing was not proven.

The difference between those situations and LUV entering PIT, as I see them, are:

~ Southwest is not retaliating, but rather growing into its next best opportunity
~ Southwest is not pricing below cost (based on 31 years of profitability)
~ Southwest has publicly maintained that it is not going after US Airways, but rather going into high-fare markets (which I am sure they have the statistics to back up that claim)

 

[flyhigh]

Fish-

We assume you meant WN not NW? Also, I wouldn't say they never engaged in predatory pricing. I think it's fair to say then when they entered into the BWI-CLE mkt (when US still has a BWI hub) and WN drove the price to $19 OW...that's below cost. What they could have argued though, as AA did (sucessfully) that you can offer a very cheap fare in limited quantities. All it has to do is cover the variable cost of carrying one more person (basically a couple bucks in gas and a soda can).

 

[AAmech]

Theres a few misconceptions here. The DOJ got after AA not for undercutting its comptitors fare but for MATCHING them. This was why the case was summarily dismissed. It was absurd.

 

[AAmech]

WN doesn't raise fares when the competitor leaves the market.

[post="236148"][/post]​

Maybe not to the extent of the Legacies but they have raised fares in the past. AA presented evidence in their Predatory case that WN undercut Vanguards fare on the MCI-LAX route untill they drove them off it. Then raised the fare in excess of what Vanguard used to charge.

 

[casual rat]

I'm thinking WN smells blood and they're going to do anything they can to take out some seats--that they will try to aquire at a later date--it's all about 'Market Share' and how to get it--to the beans.