MAH4546
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AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 6:36 am

American Airlines is seeing great results from their new simplified fare system at MIA, which was later expanded to most of their domestic network. RPM's out of MIA are up 6.5%, far exceeding expectations for the new fare system.

While MIA has always garnered a lot of O&D traffic for AA, the huge bulk had been international O&D, as passengers traveling domesticly perferred to use low fare carriers out of FLL. Though with new, lower fares closer to those out of FLL, some are finding it not worth the drive to FLL. AA's share of the SoFla-New York City O&D market, for example, is up 7%.

Miami Herald:

Changes, fare cuts lure back travelers

In an effort to compete, some traditional airlines such as American and Delta have eliminated stay requirements and dropped their highest fares.
BY INA PAIVA CORDLE

Ana Navarro, a Coral Gables resident who used to drive to Fort Lauderdale to catch a flight for her frequent business trips, is starting to fly more from nearby Miami International Airport.

With a new wave of ticket price reductions on last-minute fares and the elimination of required Saturday night stays, traditional airlines are getting customers back on board.

In fact, American Airlines' market share on one of the busiest domestic routes -- New York to South Florida -- rose more than 7 percentage points in December after it announced a Miami-only price initiative.

Navarro is one of the beneficiaries.

'Buying a ticket to Washington from Miami on American, with a couple of days' notice and no Saturday night, used to be $1,200 to $1,400 coach,'' she said. ``Now it's costing me about $250. It's an enormous difference, and it makes it very competitive with the airlines out of Fort Lauderdale. And frankly, it's not worth driving to Fort Lauderdale.''


Continued at:
http://www.miami.com/mld/miamiherald/business/10930242.htm
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A332
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RE: AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 7:16 am

All I know is AA gave me a smokin' deal on my return trip (YYC-DFW-MIA) which I will be taking April 5-12... much cheaper than flying with any discount carrier into FLL, including WS.
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ERJ170
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RE: AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 7:20 am

Are these lower fares going to have any issues on the MIA fees that AA pays.. I know MIA is expensive to fly into/out of.. What's going to happen there.. Isn't AA paying the bulk of MIA's construction cost and fees already?
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MAH4546
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RE: AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 8:34 am

Quoting ERJ170 (reply 2):
Are these lower fares going to have any issues on the MIA fees that AA pays.. I know MIA is expensive to fly into/out of.. What's going to happen there.. Isn't AA paying the bulk of MIA's construction cost and fees already?


AA and Miami-Dade County are in bed with each other. AA has little to worry about.
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N62NA
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RE: AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 8:57 am

Quoting ERJ170 (reply 2):
Isn't AA paying the bulk of MIA's construction cost and fees already?


I believe we citizens of Dade county are paying the bulk of the North Terminal construction costs and cost overruns.
 
m404
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RE: AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 1:00 pm

But are the fare profitable? Anyone can lower fares and increase sales IF load factors will permit.

As far as fees are concerned in relation to taxes collected I can only qoute what the FAA is saying. New lower fares equal less available taxes hence they will have to search for other revenue sources. The Aviation Trust Fund is running dry as a source because we "trusted" govt to stay out of it. OK, that last parts mine but the ATF has been a joke for years of deficit spending.
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MaverickM11
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RE: AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 1:47 pm

"New lower fares equal less available taxes"

I find that hard to believe since besides the FET, which is a percentage of the fare, the rest half-dozen +/- taxes are all fixed fees per segment. Therefore mroe segments means a lot more taxes.
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MAH4546
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RE: AA Seeing Good Results With Lower MIA Fares

Sat Feb 19, 2005 3:01 pm

Quoting M404 (reply 5):
But are the fare profitable? Anyone can lower fares and increase sales IF load factors will permit.


Revenue is up 6.5%. Since fixed and variable costs likely have not changed, it is safe to assume yes.
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flight152
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RE: AA Seeing Good Results With Lower MIA Fares

Wed Mar 02, 2005 1:17 pm

Does anyone know exactly what, construction wise, is going on at MIA? Terminal enlargement?
 
MAH4546
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RE: AA Seeing Good Results With Lower MIA Fares

Wed Mar 02, 2005 1:21 pm

Quoting Flight152 (reply 8):
Does anyone know exactly what, construction wise, is going on at MIA? Terminal enlargement?


A new concourse is being built from the ground up on the south side of the airport. It will open in late 2006.

On the north side, there is a huge concourse expansion and rennovation plan to create the "American Airlines World Gateway":

http://miantd.com/
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flight152
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RE: AA Seeing Good Results With Lower MIA Fares

Wed Mar 02, 2005 1:27 pm

Thanks for the quick response MAH, I'm heading down to MIA in a few weeks and I was curious what was going on.
 
ckfred
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RE: AA Seeing Good Results With Lower MIA Fares

Wed Mar 02, 2005 1:39 pm

The idea behind the fare reductions is to get more people to fly, and to get business passengers to trying to find the absolute lowest fare.

I know a lot of people who search thoroughly for rock-bottom fares, because fares with 3-days or less advance ticketing have been so horribly expensive. Now with reasonable walk-up fares, the yield for passengers who tend to travel on short notice ought to go up.
 
MAH4546
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RE: AA Seeing Good Results With Lower MIA Fares

Wed Mar 02, 2005 1:47 pm

Quoting Ckfred (reply 11):
Now with reasonable walk-up fares, the yield for passengers who tend to travel on short notice ought to go up.


Yield will go down. Though they will make up for that by attracting more passengers and better competing with lowfare carriers, so revenue and profits will go up.

For example, let's say the old walk-up fare for MIA-LGA was 1,200$, and two people bought it, but another eight went to jetBlue to save the money and get their walk-up fare (299$). Now, let's say AA offers a walk-up fare for 349$ on MIA-LGA. Still more than jetBlue, but a walk-up fare traveler is not that price sensitive, so the eight passengers that would have gone to jetBlue to save money, will pay the premium to fly MIA-LGA.

So instead of selling $2,400 in tickets to two passengers, AA now sold $3,490 in tickets to ten passengers and stole from the compieition.

Also, keep in mind the new lower MIA fares are only valid on flights to domestic cities (excluding San Juan, St. Thomas, and St. Croix), Toronto, and Montreal. They are still charging very high walk-up fares for international business markets, like London, Maracaibo, and even Nassau, which has always been the main revenue source of the MIA hub.
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ckfred
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RE: AA Seeing Good Results With Lower MIA Fares

Wed Mar 02, 2005 2:02 pm

MAH4546:

Your analysis is absolutely correct. But, my father-in-law, to beat DL's high prices, used to book an ATL-LGA-ATL roundtrip and a LGA-ATL-LGA roundtrip, thereby creating the Saturday stayover, even though it meant no flexibility for his plans.

With the new fare structure, he will probably pay a somewhat higher fare, so that he has the flexibility.

My wife's employer used to encourage employees to fly out Saturday for Monday meetings, because the extra nights at the hotel cost less than flying out Sunday evening or Monday morning.

Now, the company is no longer pushing Saturday departures, because the new "business" fares are cheap enough.