ULCCs and US airline majors drive widespread discounting. Revenue starts to suffer
Many major US airlines were facing weakening revenue conditions before the hurricanes Harvey and Irma struck the country’s southeast region in late Aug-2017 and early Sep-2017, and now those storms are driving revenue estimates lower, against a backdrop of concern about a potential fare war erupting in the market.
Delta, United Southwest and Spirit are among the airlines that have issued downward revisions to their unit revenue forecast for 3Q2017, driven in part by what those companies deem as widespread fare discounting.
American and United have been aggressively matching fares of ultra low cost airlines, and are continuing their commitment to match prices as a strategy for defending their respective hubs. At the same time, Spirit is evaluating its pricing strategy after focusing more on its yield management during the last nine months.
The result appears to be a lot of pricing churn in the US market place as new pricing tiers introduced by the country’s three large global network airlines take hold and discounters adjust to the new reality of aggressive price matching. Revenue hits from the storms, coupled with competitive pricing manoeuvres, are tempering expectations as oil prices begin to creep up.
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