Delta’s recent price reductions for last-minute travelers are creating a tidal wave in the airline industry.
United, Continental and other airlines matched Delta’s new policies, and some think that this “fare war” may turn out negatively for the industry as a whole. Others, however see the new lower prices as a good move.
“It’s particularly good for business travelers,” says Business Travel Coalition chairman, Kevin Mitchell. “The Saturday-night stay was so onerous for so long.”
Dan McKenzie, Smith Barney airline analyst wrote, “Delta’s pricing action will accelerate industry restructuring, and cash- burn will be critical in picking survivorsRevenue worries are likely to help management teams win full labor concessions.”
Other airlines may be acting too quickly in lowering their fares without fully realizing future consequences.
“Other carriers have an ability to block fare increases,” Air Travelers Association President David Stempler said. “I don’t think they have the ability to block fare decreases. If carriers have significantly higher prices, they will not be competitive.”
“The latest round of fare cuts could mean a larger net loss for 2005 than our present estimated deficit of $1.5 billion,” Merrill Lynch analyst Michael Linenberg says.
“We expect little or no revenue impact for Southwest,” analyst Anthony Cristello said.
“There’s enough momentum that we’ll see fare simplification take hold,” said airline consultant Jon Ash.
“Revenue throughout the industry is going to be lower than we thought,” James Corridore, a Standard & Poor’s equity analyst, said. “This action is going to make the losses in 2005 even more severe than they would have been.”
Murdok | Breaking eBusiness News
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