Airlines reducing prices to engage consumers
April 11, 2012, 08:30 am
Fitch Ratings recently reported that the first quarter revenue results for the largest U.S. airlines suggest carriers may be facing renewed industry margin pressure as a result of higher fuel prices and increased air travel demand. The fuel prices and potential difficulties in passing these costs onto passengers is something airlines are dealing with as they enter peak travel months in the spring and summer.
Airlines are reporting strong booking trends and successful first quarter industry fare actions to boost revenue through the winter months. However, the increase in fuel prices could reduce revenue per seat or per mile in the upcoming months. Delta and U.S. Airways reported solid March revenue trends, but United only reported unit revenue growth for the first quarter of 2012 at 5 percent, well short of recent quarterly gains.
Most U.S. carriers have indicated international and domestic demand remains strong, and Delta said its March bookings showed more particularly high-fare business customers. The results indicate the disappointing revenue numbers at United and Southwest is a reflection of network changes and merger integration, rather than an industry wide trend.
Many airlines are using unique tactics to boost sales. According to the Huffington Post, recent airline pricing changes have brought lower fares to passengers through creative recategorization of seats. Traditionally, passengers could count on good seats in first or business class levels. Now airlines are breaking down the quality of seats even further with varying seat options within the same class, allowing for different fares to be implemented.
Delta created a new sub-economy ticket to offer ultra-affordable accommodations for travelers on a budget. The seats in the middle of the row away from an aisle or a window are the new sub-economy seats. The tactic can get confusing so all purchases are non-refundable and cannot be changed at the airport, The Huffington Post reported.
U.S. Airways is offering ChioceSeats, which are mostly window or aisle seats toward the front of coach, which cost more than coach seats but less than first class or business. Some of these seats may have more legroom available or a seating configuration favorable to exit rows. These seats get priority boarding so there is also access to overhead storage space, the Post reported.
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