United, Delta and American Airlines announced their latest USD10 hike on round-trip fares has failed as LCC giant Southwest Airlines did not follow suit (AP/Wall Street Journal, 06-Apr-2011). On 05-Apr-2011, the increase collapsed at the same time AirTran and Frontier put a limited number of seats for summer travel on sale. The average ticket price for a US domestic economy seat sold on Expedia has been up 6% to 17% weekly in 2011 compared with the same weeks in 2010. Services from LaGuardia to O’Hare cost 27% more in Mar-2011 on average. Tickets sold for LA-New York were 21% more expensive than in 2010.
United, Delta and American Airlines fare increase fails
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jetBlue may return to Atlanta Hartsfield-Jackson Intl to stimulate competition in a changed market
jetBlue Airways appears to be making a major network move in 2017, with a potential return to Delta-dominated Atlanta after a short-lived stint at the airport in 2003. Both jetBlue and the US industry have undergone significant change during that thirteen-year time period. jetBlue has widened its passenger base to encompass business passengers along with VFR (visiting friends and relatives) customers, and has successfully introduced a premium cabin within the LCC business model. Changes in the US domestic market include sweeping consolidation and the rise of ultra-low cost airlines, which have arguably created permanent disruption in airfare pricing.
Dynamics have also shifted in Atlanta during that time period. Although Delta remains the dominant airline, Southwest has acquired AirTran and put less emphasis on Atlanta as a hub. Ultra-low cost airlines have also made moves in Atlanta during the past couple of years. Those changes could create an opening for an airline that offers a different product proposition in the market.
jetBlue’s return to Atlanta depends on the airport granting the airline’s request for specific gates. A launch of flights would be mutually beneficial for both jetBlue and Atlanta. jetBlue gains access to one of the largest US domestic markets and Atlanta would broaden its number of airlines spanning three distinct business models – full service airlines, medium frills LCCs and ULCCs.
Alaska Air Group: locked in limbo until the government renders a decision on Virgin America merger
Alaska Air Group remains in limbo as it waits for the US Department of Justice (DoJ) to complete a review of the proposed Alaska-Virgin America merger. Alaska had originally hoped to gain government approval and close the deal in early 4Q2016, but the regulatory review unsurprisingly is taking longer than expected. However, Alaska remains confident of finalising the arrangement before the end of 2016, and is taking the proper financial steps to finance its acquisition of Virgin America.
In the short term Alaska is experiencing slightly improving trends in the US marketplace, and its unit revenue improved on a sequential basis from 2Q2016 to 3Q2016. Another positive development for Alaska is a slowing of competitive capacity growth in its markets in 4Q2016 and in early 2017. The tempering of growth is reflective of most US airlines planning to lower capacity expansion in 2017 as higher oil prices heighten the importance of returning to positive unit revenue.
Alaska also plans slower capacity growth of 7% in 2017, versus 8.5% in 2016. Approximately 3ppt of the increase is driven by longer stage lengths and the annualisation of nearly 10 new routes launched in 2016 – a mix of smaller and larger markets with varying levels of competition.