Delta Air Lines is poised to spread a simplified pricing design across the domestic U.S. market, according to published reports citing the latest issue of
Time. Delta in August began reforming airfares by revamping pricing in its Cincinnati hub. Should the carrier completely simplify domestic pricing, it would be the largest carrier to do so, following such smaller competitors as Alaska and America West airlines. Low-cost carriers also use more simple pricing principles, as do low-fare units of major carriers, such as United's Ted and Delta's Song. Delta officials were unavailable for comment.
"The fare program is scheduled to go into effect later in January, giving its competitors a chance to respond," said Helane Becker, analyst with The Benchmark Co. "We believe that if others do not match this new program, Delta will likely roll it back."
The new fares, if structured like those in Cincinnati
(BTN, Sept. 6), would be heavily reduced in some cases from current levels and free of many restrictions such as Saturday night stay requirements. Total fare types available would be reduced, as would some ticketing fees. In a speech last month in New York, Delta CEO Gerald Grinstein said new pricing in Cincinnati pushed bookings in that market up 30 percent and helped migrate more customers to Delta's Web site, the carrier's lowest-cost distribution channel.
"Delta is the latest of the network airlines to flip off the auto-gouge switch on their domestic pricing machine," said Robert Mann of R.W. Mann & Co., an airline industry consulting firm in Port Washington, N.Y. "America West, Northwest and American already have publicly experimented with fare caps, fare simplification and relaxed terms. It is a trend that will eventually lead to Value Pricing II in domestic markets."
Mann also suggested that Delta is "staking its claim for customers who previously preferred or tolerated US Airways, who will now purchase from anyone but."
The impact on Delta's corporate customers likely would include a reworking of contracts-a development already experienced by Cincinnati customers-and redefined preferred relationships.
"Corporate discounting has always been the bane of the industry," said Kevin Mitchell, chairman of the Business Travel Coalition. "Once you are in that game, you cannot get out, but how do you increasingly match low-fare carriers on price while still being at a cost disadvantage and also paying discounts, whereas the LCCs are not paying discounts?"
As a result, Mitchell suggested legacy carriers "bite the bullet" and craft innovative corporate relationships that are not revenue-dilutive.
Delta currently is attempting to restructure without bankruptcy court supervision and repeatedly has said customer-friendly initiatives are a tenet of its turnaround plan.