Vivavegas From United States of America, joined Apr 2004, 505 posts, RR: 2 Posted (7 years 11 months 2 days 20 hours ago) and read 2855 times:
Looks like YX is starting this round with the following e-mail that arrived this afternoon:
"You Can't Beat $99 Roundtrip to Minneapolis/St. Paul!
Get a small group of friends together to shop, sightsee or take in the Twin Cities' arts. We've lowered the minimum group size as well as the fare. Save big while you have fun!
Each group reservation must include 6 to 10 people.
Travel together July 10 through December 17.
Book your tickets by December 14.
Three-day advance purchase required.
$99 per person roundtrip includes federal tax; other security, facility and segment fees are extra.
This offer is only for group travel between Milwaukee and Minneapolis/St. Paul.
Book soon as space is limited and blackout dates (Sept. 2-6 and Nov. 22-28) apply. Tickets are nonrefundable.
Designate a group leader to handle all reservations and to make a single payment for all tickets.
Make your group reservation through Midwest's Group Sales office at 414-570-3655 or 888-601-4296. Monday through Friday, 8 a.m.-5 p.m.
TIP: Light rail service is now available from the Humphrey Terminal to the Metrodome, Nicollet Mall and Mall of America. View the light rail service map."
They preface it by saying for group travel only, but $99 including fed taxes is the lowest fare ever between MKE-MSP. No response yet from NW.
Are loads that poor between MKE-MSP to justify $99 fares? Can any money be made on this?
Tango-Bravo From United States of America, joined Jun 2001, 3725 posts, RR: 31 Reply 4, posted (7 years 11 months 2 days 19 hours ago) and read 2767 times:
Why should NW be so foolish as to react to YX? If I were NW, I would be thinking "more power to you, YX." But then again I will be the last to ever accuse the management of a hardcore legacy like NW of thinking and acting rationally.
It won't siphon away any of NW's better-yielding traffic and it sounds like the YX fare is so restricted as to be mostly a mirage. Beyond that, what happens when one or more members of "the group" decide they have to do their own thing and travel at a different time/date from the rest of "the group?" Wherever there is a "group" reservation of 6-10 people initially booked on the same itinerary, by the time it's over there are almost invariably at least 2-3 different itineraries actually flown by members of "the group." Will the individuals who do their own thing end up paying a fare difference of $300-400 -- maybe more -- plus change fee because they no longer qualify for the group fare? And what if by one or more of the "group" changing from the group reservation the "group" becomes less than 6 pax? Will they all have their proverbial eyes gouged out by being required to pay up to the applicable non-group fares? Or is there a restriction not noted that the group-rate tickets are non-changeable and have zero value toward another ticket if not used for the flights/times originally ticketed? (ie use-it-or-lose-it)
Knope2001 From United States of America, joined May 2005, 2555 posts, RR: 31 Reply 5, posted (7 years 11 months 2 days 19 hours ago) and read 2763 times:
I think there are some key reasons why this $99 sale is a net positive for Midwest and not a sign of trouble.
(1) It's Group Travel Only
This fare is good only for groups of 6-10 people. The passengers they carry at this fare will very likely be new stimulated traffic that would not have otherwise flown. How many groups of 6-10 people would Midwest have carried otherwise between MKE and MSP? But with a fare like this, there will be some family outings, groups of friends, etc that chose this as a getaway outing.
(2) Exposure and Publicity
A fare of $99 round trip is definitely something that catches the eye of those who get the e-mail. (Not sure if went to all Midwest frequent fliers, but that’s how I received it.) Yes, we get regular e-mails with fare specials. But an unheard of fare like this – though it is not one that most will be able to use – cements in the memory that Midwest flies to Minneapolis and they might have some great fares. That makes the person more likely to remember and check out Midwest. Remember that Northwest (and the airlines they acquired) has had no major competition in Milwaukee-Minneapolis for over 40 years. So Midwest needs to get the word out that there is a real choice in the market now. And getting people to experience Midwest, the 717 and the Humphrey Terminal will definitely make an impression.
(3) Yield Similar to Connecting Traffic
Is a $99 round trip profitable for Midwest between MKE and MSP? Not if that’s all they are carrying. But as supplemental revenue added to higher-fare local traffic, it’s probably not bad. It probably is somewhat similar to what Midwest earns for the MSP-MKE leg when they sell an excursion fare in a market like MSP-LGA. The fare MSP-LGA is much higher than $99 round trip, but Midwest has to carry the customer on four legs to earn that fare.
Again, this $99 round trip is mostly going to be sold to new traffic in a very specific range that is stimulated by the offer. It will cannibalize very little if any existing higher-fare traffic. And it will buy some exposure and publicity in the minds of some of the flying public.
As for loads, well, if you look out into mid July there are already many MKE-MSP 717 flights which are already booked to load factors in the 60’s and 70’s. Certainly not all, and this is definitely the high-demand Summer season. I don’t think this $99 round trip for group fares means they are having a tough time selling seats. They appear to be doing okay now, undoubtedly selling many connecting seats, too. As long as they keep seats open for the local business traffic that tends to book largely in a 14 day window, sales like this probably are a net positive.
Vivavegas From United States of America, joined Apr 2004, 505 posts, RR: 2 Reply 6, posted (7 years 11 months 2 days 19 hours ago) and read 2746 times:
From what I'm hearing from my co-workers flying into Humphrey is awesome! (have yet to make that run lately) From plane to curb is like 3 minutes. Glad to see they are playing off the lightrail to in that e-mail. Definitely a benefit!
N917ME From United States of America, joined Feb 2005, 726 posts, RR: 1 Reply 7, posted (7 years 11 months 2 days 19 hours ago) and read 2738 times:
Sales like this are also used to get the loyal NWA customers to give YX a try. Once someone travels YX, they usually will be a repeat customer, not only to MSP, but systemwide.
The load factors have been great system wide. Most of the flights I have seen have been full or very close to being full.
This sale is a good thing for YX. I have heard that NW load factors from MKE are not that great. MKE has been a fierce battle for some time, however with NW internal issues and financial issues the playing field is leveling out as NW may not be as focused on MKE as it is on it's internal issues. However, I fully expect NW to fire back. Let the battle begin!!!! YX=1 NW=0
AirTran737 From United States of America, joined Apr 2004, 3639 posts, RR: 12 Reply 12, posted (7 years 11 months 2 days 18 hours ago) and read 2660 times:
Quoting FutureFO (Reply 2): The loads are awesome on the MKE-MSP run. Almost full on all round trips. 3 on the 717 and 2 on the FRJ
Actually I pulled up the loads for tomorrows flights (6-22) and they are as follows.
Flight 2010 is booked to 31 out of 32
Flight 301 is booked to 41 out of 88
Flight 305 is booked to 54 out of 88
Flight 2016 is booked to 27 out of 32
Flight 309 is booked to 64 out of 88.
Comes out to about 66% of the seats for the day being sold. Not to bad, but what is the break even factor for Midwest? I'm sure that the Skyway flights are making money only having 1 and 5 seats open respectively. The Midwest flights have 47, 33, and 24 seats open respectively.
Nice Trip Report!!! Great Pics, thanks for posting!!!! B747Forever
Boeing7E7 From , joined Dec 1969, posts, RR: Reply 13, posted (7 years 11 months 2 days 18 hours ago) and read 2649 times:
Quoting Tango-Bravo (Reply 4): Why should NW be so foolish as to react to YX? If I were NW, I would be thinking "more power to you, YX." But then again I will be the last to ever accuse the management of a hardcore legacy like NW of thinking and acting rationally.
By my numbers, at $99 a seat Midwest can make a killing on this route. The seat cost for the trip is about $30 a pax. They only have to fill 30 seats to break even.
Cubsrule From United States of America, joined May 2004, 21208 posts, RR: 19 Reply 14, posted (7 years 11 months 2 days 18 hours ago) and read 2641 times:
Does NW really care about MKE-MSP O&D traffic? Average O&D is only 424 pax/day, and there are currently 406 seats on YX (3 717, 2 FRJ) and 915 seats on NW (2 752, 1 753, 1 320, 1 CRJ, and 2 D95). It's only about a third O&D traffic (probably actually somewhat lower than that). I feel like NW would have more cause to worry if YX tried a similar stunt on MKE-LGA.
I can't decide whether I miss the tulip or the bowling shoe more
Knope2001 From United States of America, joined May 2005, 2555 posts, RR: 31 Reply 16, posted (7 years 11 months 2 days 18 hours ago) and read 2640 times:
>>If the loads are so good as quoted above, then why cut the price?<<
I'll echo N917ME's comment of "to attract new customers", because indeed once someone knows about and had experienced Midwest they are much more likely to seek them out.
But I do have a few other points to add to this question of "why cut the price if loads are good?"
(a) While loads have improved, there are still plenty of empty seats. Midwest exanded their capacity by 240% over the course of several weeks, and it's taking time to grow the traffic accordingly. What I've been seeing on seat maps the past couple of weeks is several flights with 60-75% of the seats sold, but others are only in the 30's, 40's and 50%'s. This major capacity expansion is only a few weeks old, and there's room for more passengers.
(b) The $99 round trip fare is, again, just a promotional fare for groups of 6-10 people. Seating is limited, and it will probably only add a small number of passengers overall to thise market. But these passengers are likely all or nearly all newly-stimulated traffic. It's very much like Northwest's periodic Mall of America one-day packages where NW has flown people up to MSP for remarkably low prices on shopping junkets. As long as you're careful not to dilute any business traffic that might try to use these fares, you're growing passengers and revenue out of thin air and carrying them for very little expense. This is the type of thing that Midwest is going for with this promotional fare.
Cubsrule From United States of America, joined May 2004, 21208 posts, RR: 19 Reply 20, posted (7 years 11 months 2 days 18 hours ago) and read 2619 times:
Quoting N917ME (Reply 18): If NW didn't care, why do they have 3 large aircraft (752/3) going there? What are the loads on those flights?
By your logic, when NW was running 752s MDW-MSP, they cared more about MDW than ORD because ORD didn't get any 752s. NW is probably the best US major at matching capacity to demand-- they can be as they have pretty much a continuum of aircraft. I assume they send the 757s because they fill them. There would be no other reason. I for one would rather fly a smaller a/c on the route. Quicker boarding, quicker deplaning, less of a wait for luggage, etc.
I can't decide whether I miss the tulip or the bowling shoe more
Knope2001 From United States of America, joined May 2005, 2555 posts, RR: 31 Reply 23, posted (7 years 11 months 2 days 18 hours ago) and read 2588 times:
>>Comes out to about 66% of the seats for the day being sold. Not to bad, but what is the break even factor for Midwest? <<
The concept of "break even load factor" is very problematic.
The composition and yield of traffic makes all the difference in the world. Let's say for illustration there are four types of travelers in that market:
LB-Local Business (local MKE-MSP passengers who pay higher fares)
LE-Local Excursion (local MKE-MSP passengers who fly on chepaer advance-purchase fares)
CT-Connecting Traditional (pax in markets like MSP-MKE-PHL who pay normal fares)
CO-Connecting Opaque (pax in markets like MSP-MKE-PHL who get rock-bottom fares in places like Priceline)
And let's say these are the typical fares each group pays:
LB Local Business fares average $220 each way
LE Local Excursion fares average $105 each way
CT Connecting Traditional fares average $50 each way. That's because the average fare is $125 each way, but because of the connection, only 40% of the fare gets allocated to MSP-MKE ($40). The other 60% (MKE-PHL, for example) gets allocated to the other leg.
CO Connecting Opaque fares average $36 each way. Average fare is $90 each way but only 40% is allocated to MSP-MKE leg.
There are 217 people booked MKE-MSP tomorrow. Here's one possible breakdown of that traffic into the four categories:
That's $29,035 of revenue from MSP to MKE tomorrow.
Here's a different possible breakdown:
That same load of 217 in this instance produces $14,516 in revenue, or only 1/2 of first scenario.
So the notion of break even load factor is hard to reconcile with this kind of reality. If the cost for Midwest to fly MSP-MKE tomorrow is $24,000 (and this number iteself is really hard to know), in one case the 66% load tomorrow is very profitable. In the other case it is very much in the red.