Originally Posted by calcapt
Carriers do it routinely. Airlines will defend their hubs and passengers at costs that seem illogical to most. A carrier assumes that when a customer is lost they won't come back; therefore, it is better to lose revenue and keep passengers and market share for a time in the future when loads and yields will improve to the point where profit can be made. That is what the JB team is having a hard time understanding. What Delta is saying to JB is: Hey buddy, we are not going to allow you to waltz in here and steal our business. Some may call it irrational competition but Delta is just reacting to JB coming in and lowballing ticket prices just to steal business. If Delta has to match or lower prices even more - so be it. JB's own management says that they are operating their flights at a loss yet they continue to offer bargains galore. So who is irrational now? You may recall that IAir tried that pretty unsuccessfully at IAD. It used to be that all the majors were always at each others throats trying to move in on routes, hubs and the like. Once they all understood that moving to Atlanta was only going to start a war with Delta or moving to DFW was only asking for a fight with AA, they essentially stopped doing it and declared a truce. It always turned into a bloodbath and everybody involved lost money. The only ones still silly enough to think they can move about untouched are the LCCs. They somehow think the Legacys will be willing to surrender market share just because someone new comes to town. It won't happen without a costly fight, a VERY COSTLY fight!
Carriers do it routinely - Yes, but only for a limited time when they are negative cashflow for years.
Market share - Every one of the majors in BK has followed the MARKET SHARE mantra. Losing money and then losing even more to keep market share is obviously not working. Just ask most of the readers on this board. IF you are losing money, raise prices. In good times, a company can afford to lose on certain routes and make it up on others to drive out competition. But when you are in the red, you can't lose as much for as long. Dave N even said it in the article that it was time to raise prices to make a profit. When losing money doesn't work, try something else. At least we have reconginzed the MARKET SHARE Mantra is not good and are fixing it. The legacy carriers still have not awaken to that fact.
No one said the LCC will be untouched. However they will be less affected by the same conditions. Most of the LCC have very little waste to trim. Minor ticket price increase mean a small profit, where the majors, the same price increase just means losing less. The majors have (had) lots of areas to cut cost and improve. But can they trim enought? We will all have to wait and see.
Just my opinion...
FNG