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Delta Equals Change… in Math

Delta has decided to simplify its fare structure, and now it appears American might following suit. (Both airlines experimented at one of their hubs, but did not make the experiment system-wide). It might seem strange to think that this will remedy the “long-suffering” airline industry. However, it actually might. No matter how frilly JetBlue and Frontier pretend to be, they still do not have international service or first class. If the article is true and first class roundtrips are capped around $1200 or $1400…that is probably low enough to fill up the plane.

The idea is that in the past, economy passengers were pure profit, as the first class passengers made sure every flight broke even. Now, most first class passengers are “upgrades” and not paying customers. If paying customers start buying more first class tickets, fewer seats would have to be given away as upgrades. However, the airlines would have to turn a profit based on their revenue in economy class. Given that Southwest already has solved that puzzle, the only reason it would be harder for Delta or American is because they have a higher cost-per-mile expense. Another reason that larger airlines would gain an advantage: point-to-point is largely a myth. It’s true that Southwest eschews having a major hub, but many of its “point-to-point” flights actually involve multiple stops and are not to larger, more central airports. United and American actually have far more point-to-point flights, especially because they have code-sharing partners.

In any case, “legacy” airlines still need to press the Federal Government to improve security speed and professionalism and work with their host cities to develop better public transportation links and facilities. However, lobbying takes money and if the simplified fares strategy works, the airlines will have more dollars at their disposal.

posted by Thomas at 3:10 PM 0 comments