All’s fare in love and war: is aggressive pricing a new competitive reality?
Bankruptcy and subsequent consolidation have delivered the majors a low cost base and strong market positions, especially at their main hubs. But a combination of lower fuel prices and a resurgence of low price competition has created downward pressures on yields over the past year.
These may be recoverable, but there is a constant threat of ULCC entry on city pairs that have been lost as major airlines consolidated – a network phenomenon that occurred in Europe and Asia as LCCs have successfully gained dominant positions. Compared with other developed regions there is relatively lower connectedness for medium sized airports since consolidation.
As those airports (and their local economic interests) become more aggressive in their marketing activities, and as ULCCs expand, a new network and pricing dynamic will appear. Unlike their Asian and European full service peers – who are much more exposed to LCC pressures – US airlines have not resorted to establishing low cost subsidiaries.
Instead they have used various pricing strategies on their mainline operations. To date this appears to have been successful. As low cost competition grows and the majors’ cost bases rise, this may call for new responses.
- How effective are existing pricing strategies like Basic Fares in competing in the long run with ULCCs?
- How are the network carriers defending their hubs from LCC and ULCC incursions?
- What prospect is there of establishing LCC subsidiaries as parent company costs rise?
- What role can loyalty play in this ultra competitive environment, when for example the vast majority of travellers will only fly with the airline once a year?
- With yields under pressure, investing into product and the customer experience is vital; how effective are the measures being adopted?
Moderator: ICF Aviation, Principal, Carlos Ozores
Panel:
- Allegiant Air, Senior Vice President, Commercial, Lukas Johnson
- Lufthansa Group, Vice President Airline Sales, The Americas, Tamur Goudarzi Pour
- VivaAerobus, Vice President Network Planning, Revenue Management & E-Commerce, Javier Suarez
- Volantio, Chief Executive Officer, Azim Barodawala