What is and isn’t a merger effect.

A reader wrote me yesterday about some pricing he saw between Kansas City and New York City (Newark Liberty International Airport aka EWR)  recently.  In the past, he’s always flown Continental on a regional jet non stop for a competitive price.  Most recently, he saw the same flights for far higher prices than in the past with other airlines offering one stop pricing that reflected what he was used to.  He asked if this was one effect of the recent Continental / United merger and I said that I didn’t think so.

I think the pricing were seeing from airlines today, particularly on non-stop exclusive routes, is reflective of just how hard it is to make money in this business today.   In United’s case, they probably enjoy more competition into and out of Newark than they used to.  However, they also need to earn more money and show promised profits.  On exclusive non-stop routes, they’re going to price seats for the most they can get. 

Business travelers do differentiate between non-stop and multi-stop flights.  They may be closed off from traveling in business class these days but most aren’t being required to take the least expensive coach seat.  In the reader’s particular market, they probably fill those regional jets with mostly business travelers and business travelers remain a big piece of profit for airlines.

I pointed out to the reader that he could probably enjoy almost as quick a flight on more comfortable equipment if he shopped Southwest Airlines but that points up another issue.  With the conflicts going on with Global Distribution Systems and American Airlines as well as the fact that LCC carriers in many cases are using GDS companies and/or online travel agencies to advertise their fares.  Absence of those fares being shown makes it possible for network carriers to raise prices on those GDS systems and earn more.

And this is why I would like to see LCC air fares start showing up on these travel websites.  I think there is quite a bit of low hanging fruit for the LCCs to reach on these sites and I think the travel websites have the potential to continue on in the travel world if they find a way to embrace and entice LCC carriers.  In addition, it narrows the fare gap we see between network carriers and LCCs.


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