Delta Air Lines' revenue management team was "underwhelmed" by fare experiments that expired at the end of March, according to Lee Macenczak, the carrier's senior vice president for sales and distribution. Delta's was one of several pricing initiatives undertaken by major U.S. carriers during the past year as the industry sought methods to stimulate traffic and improve revenue generation. American and United airlines also evaluated simplified pricing, but only the latter has formalized a new structure
(BTN, Jan. 20).
Delta's test results and United's hesitation in expanding the new pricing design across its system suggest the Big Six network carriers still are searching for the right formula. "The outcry for fare reform will be there no matter what the economy is doing," Macenczak said. "You will never make the market happy, but, privately, we are coming to some good agreements with customers."
Other recent indicators of a depressed fare environment include a flat to 2 percent decrease in Continental's April revenue per available seat mile--announced yesterday--and 9 percent drops in United's first-quarter RASM and passenger yield. United's figures, including a $1.3 billion first-quarter loss, were released this morning. Deutsche Bank Securities analyst Susan Donofrio, in a research note also issued this morning, said business fares among major U.S. carriers this week were down a percentage point from last year. Donofrio said US Airways' business fares increased the most, up 4 percent, while Delta's 8 percent decrease was the widest in the industry.
America West Airlines, meanwhile, continues to insist its reworked fare structure is working as intended. "We have seen a nice shift in business share from other airlines to our lower fares," said CEO Doug Parker, speaking this week at the Association of Corporate Travel Executive conference in Las Vegas. "It has worked well because it has not been matched. We know it works for us, but I am not sure it would work for other airlines."
Over at United rival Frontier Airlines, a new pricing concept launched in February after nine months of declining walk-up traffic generally has had the expected impact, according to CEO Jeff Potter. "After putting in place the new structure, we saw an immediate rebound in the volume of close-in bookings," he said, "but we do still see a lower fare level, as average fare paid is down. The new structure was not intended to address the 21-day advance booking and beyond market."