http://www.reuters.com/article/reutersEdge/idUSN0240926420071002?pageNumber=1
Virgin fuels fare war between U.S. airlines
By Kyle Peterson - Analysis
CHICAGO (Reuters) - The launch of low-cost airline Virgin America Inc this year has triggered a fare war that has nearly halved ticket prices on some routes and could erode earnings at rival airlines.
The competition has been especially fierce between Virgin, which is partly backed and fully branded by British entrepreneur Richard Branson, and UAL Corp's (UAUA.O: Quote, Profile, Research) United Airlines on the transcontinental route between San Francisco and Washington, D.C.
Low-cost carriers JetBlue Airways (JBLU.O: Quote, Profile, Research) and Southwest Airlines (LUV.N: Quote, Profile, Research) also have been drawn into a turf war with Virgin and responded with capacity additions and fare cuts.
Man, sometimes it's like deka vu all over again, isn't it? Airline management uses discount airline pilot wages to subsidize bottom line and uses that cheap labor to undercut the "going rate" between city pairs in an attempt to steal market share. Rivals compete by matching fares and adding capacity in an attempt to "S curve" the new competitor to death. No one makes any money, except for maybe the airline that pays its employees the least to subsidize its losses.
The only difference this time, I guess, is that instead of impacting those mean, old, over-paid legacy employees, it looks like this might hurt the "old" darlings of the industry as well.
I just can't wait for Tilton to come to us in '09 and tell us how our A320 and 737 Captains need to take paycuts so that we can compete with this new and improved breed of discount airline pilots.
It's a good thing, too, that these guys are coming along because we all know airfares are WAY too high.
Let the bleeding commence.........
Virgin fuels fare war between U.S. airlines
By Kyle Peterson - Analysis
CHICAGO (Reuters) - The launch of low-cost airline Virgin America Inc this year has triggered a fare war that has nearly halved ticket prices on some routes and could erode earnings at rival airlines.
The competition has been especially fierce between Virgin, which is partly backed and fully branded by British entrepreneur Richard Branson, and UAL Corp's (UAUA.O: Quote, Profile, Research) United Airlines on the transcontinental route between San Francisco and Washington, D.C.
Low-cost carriers JetBlue Airways (JBLU.O: Quote, Profile, Research) and Southwest Airlines (LUV.N: Quote, Profile, Research) also have been drawn into a turf war with Virgin and responded with capacity additions and fare cuts.
Man, sometimes it's like deka vu all over again, isn't it? Airline management uses discount airline pilot wages to subsidize bottom line and uses that cheap labor to undercut the "going rate" between city pairs in an attempt to steal market share. Rivals compete by matching fares and adding capacity in an attempt to "S curve" the new competitor to death. No one makes any money, except for maybe the airline that pays its employees the least to subsidize its losses.
The only difference this time, I guess, is that instead of impacting those mean, old, over-paid legacy employees, it looks like this might hurt the "old" darlings of the industry as well.
I just can't wait for Tilton to come to us in '09 and tell us how our A320 and 737 Captains need to take paycuts so that we can compete with this new and improved breed of discount airline pilots.
It's a good thing, too, that these guys are coming along because we all know airfares are WAY too high.
Let the bleeding commence.........
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