Delta airlines increased it's fares in hopes to bring in extra cash on the 18th. When airlines do this, they do it in the hopes that other airlines will follow their lead so that they can call make more money without one seeming overpriced. Once Delta had upped their prices by as much as $60, American Airlines did the same. However, Southwest Airlines however did not. Considering that Southwest is still one of the cheapest, it made Delta and American look way overpriced with their increases and both Delta and American had lowered their prices back to normal by the end of the week. This shows the huge amount of competition between 3 of the most major airlines in America.
Sunday, February 27, 2011
The Big Airlines get Cold Feet
Delta airlines increased it's fares in hopes to bring in extra cash on the 18th. When airlines do this, they do it in the hopes that other airlines will follow their lead so that they can call make more money without one seeming overpriced. Once Delta had upped their prices by as much as $60, American Airlines did the same. However, Southwest Airlines however did not. Considering that Southwest is still one of the cheapest, it made Delta and American look way overpriced with their increases and both Delta and American had lowered their prices back to normal by the end of the week. This shows the huge amount of competition between 3 of the most major airlines in America.
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4 comments:
This has not been an uncommon trend within the airline industry in recent years. Southwest has continually been in the fore front of lowering prices and fees among the market competitors. Their business level stratehgies have helped them stay above the curve in terms of employee productivity, overhead costs, and variable costs. Traditionally, if Delta had tried some sort of "price fixing" it wouldve worked, but superior competitors such as Southwest have made these types of pricing strategies much harder to achieve.
As far as I know, international airline fares have already gone up very high this year. I think all the major national airlines, even including Southwest, have to increase fares sooner or later this year due to the oil tensions in Lybia. It's risky to try to keep the prices low like Southwest in response to highly increasing oil prices now. Major airlines can start from increasing small things such as baggage fee, because too expensive fares may discourage the consumers from choosing the airline.
Airline industry is a very risky business. The price of oil is highly correlated with the airline ticket price. I'm not exactly familiar with how this business work but it is possible that Southwest might have oil reserves that were bought when the oil price was significantly cheaper. This summer should be interesting to see when the oil prices usually skyrocket and something political going on in the Middle East. This would intensify the competition between the airlines.
The air travel industry is very interesting to follow. Oil prices directly the prices that airlines should charge for their services but some airlines such as Southwest use strategies like the one mention which makes the decision making process in the air travel industry extremely complicated.
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