Deals Pop Up as Airlines Wage Limited Fare Wars

31 Aug 2015 | Author: | No comments yet »


ABOARD AMERICAN AIRLINES FLIGHT 1223 —Airline fare wars are making a comeback. United Airlines plans to change the way it schedules flights and to use new technology to tackle the delays and cancellations that have hurt its competitiveness, company executives told Reuters.United Continental Holdings is getting a nice bump upwards in its stock price Friday, a day after S&P Dow Jones Indices announces that the parent of United Airlines will join the S&P 500 list. “American, Delta and Southwest are currently the only three US airlines in the S&P and the inclusion of United will round out the ‘big four’ in the industry,” analyst Helane Becker of Cowen and Co. wrote in an investor note. “Clearly, nothing fundamental has changed, but we expect the shares to react favorably to the announcement.” The new initiatives aim to narrow the gap in performance between United Continental Holdings Inc (UAL.N) and Delta Air Lines Inc (DAL.N), which has the best on-time record of U.S. airlines. They reflect a broader effort by United to boost customer and investor confidence following high-profile glitches that halted flights twice this summer, causing widespread delays.

Fliers have been able to fly Chicago to Boston for $80 roundtrip, San Francisco to Las Vegas for $67 roundtrip and New York to Los Angeles, with a connection, for $150 roundtrip. United plans in January to alter its schedules to resemble the way rivals circulate planes through their networks, Vice President of Network Operations Tracy Lee told Reuters. The price of oil is at the lowest level in six and a half years and the industry is saving billions of dollars on fuel, giving airlines leeway to cut fares but still post healthy profits.

Lee declined to elaborate on the changes but said they could result in an immaterial decrease in capacity because some planes could spend fewer hours in the air. Senate report launched by Florida Democrat Bill Nelson takes aim at these fees and calls for the airlines to make them very clear to travelers before they purchase tickets. So, while the number of domestic flights is down slightly over the past 12 months, there are now 3.4 percent more seats for sale — too many to meet the demand in all cities.

Operating margins are improving as a result, and due to CAPEX at the low end of the company’s historical range, United is generating significant free cash flow. Change fees are particularly expensive on nonrefundable tickets, and these are the tickets most people buy because they are significantly cheaper than tickets that allow a change without a fee. Delta had about 84 percent of its flights arrive on time, while Southwest Airlines Co (LUV.N) and American Airlines Group Inc (AAL.O) each had on-time arrival rates of about 78 percent. United, the world’s second-largest airline by capacity, is investing in back-end technology and training to quell risks, Chief Information Officer Linda Jojo said in her first media interview since taking over the airline’s top technology job in 2014. The carrier started a trial this spring of an automated system, built in-house, to tell agents to prolong boarding so passengers with tight connections can make their flights, she said. “We know your plane landed,” she said. “How can we use data and analytics to actually hold that door open for you?” The move saves United the costs of rebooking.

If you change your ticket, not only will you be charged the change fee, but you’ll also have to pay any difference in the fare price if it has gone up. Later this year, United plans to test tracking devices embedded in badges worn by those who clean the planes, which would alert gate agents when the aircraft is ready to board, Jojo said.

If your original ticket is more than $200, you are probably better off calling to change or cancel so you can get a credit for the amount that’s over the $200 change or cancellation fee. The airline has not suffered a breach of its data systems, except for isolated cases in which hackers accessed mileage accounts by guessing a customer’s weak password or using passwords leaked elsewhere. By doing so, they actually undercut the ultra-low-cost carries because Spirit and Frontier charge customers extra to use overhead baggage bins or to have a drink of water.

United tested the methods that hacker Chris Roberts said he used to gain access to a United flight’s controls through its entertainment system, she said. The business traveler usually buys more expensive fully changeable and refundable tickets, and that traveler may change one ticket 10 times at no fee. American, United and Delta made $6.6 billion in combined profits during the first half of this year, so they afford to fight back on routes such as Chicago to Atlanta. Government Accountability Office in April called for further investigation into whether flight controls could be accessed remotely via other data systems. American spokesman Casey Norton says the airline “constantly looks at how we compete against a wide variety of airlines — from low cost carriers to premium global brands.” Delta and United declined to comment.

Fliers booking these tickets typically save $15 each way, but are not given advanced seat assignments, can’t cancel or change the flight and are last to board. Additionally, they take in billions in dollars fees for checked baggage fees and other things that were included in the ticket price back in the 1980s. One of my biggest issues with airline fees are the fuel surcharges that are charged to Europe, which I’ve argued for years should be part of the base fare. That’s down $5.41, or 1.1 percent, from the same period last year, according to the Airlines Reporting Corp., which processes ticket transactions for airlines and travel agencies. At press time, airline fuel was selling for approximately $1.90 per gallon, and the airlines are making quite a profit off the airline fuel surcharge, which is $516 to most cities in Europe.

Sites like ITA Software and Cheap let travelers pull up a calendar with the cheapest days to fly between two airports. • Take advantage of the 24-hour rule. The fuel surcharge to Europe is even higher in business class, but it doesn’t cost the airlines any more to fly a business-class traveler than it does a coach-class traveler.

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