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mariner
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AMR And CAL - Different Views

Sat Feb 25, 2006 4:04 am

From the JP Morgan airline conference, American and Continental offer different takes on the present airline situation and the way ahead:

http://www.thestreet.com/_googlen/stocks/transportation/10270098.html

Some of it is blunt and funny - especially the quote about Delta's Simplifares.

cheers

mariner
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 4:19 am

It does not surprise me that they have different views on the same topic.
My Dr told me once "Show 12 different DR's the same xray and get 12 different answers" It is the same way with the airlines.

Some are expending while others cut back. Some are in Chap 11, some are not, some got caught with their hand in the employee cookie jar, and some have not.
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MalpensaSFO
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 4:58 am

Quoting Sunking737 (Reply 1):
Some are in Chap 11, some are not, some got caught with their hand in the employee cookie jar, and some have not.

In order...

Chap 11 : Delta
Not: Continental  wink 
Cookie Jar: American Airlines
Have Not: Southwest  wink 
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DL WIDGET HEAD
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 5:06 am

It's interesting that DL and AA have similar views and strategies for the future but CO is drastically different. I guess they each know what's best for their own airline.

[Edited 2006-02-24 21:06:36]

[Edited 2006-02-24 21:09:58]
 
AeroWesty
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 5:26 am

Quoting Mariner (Thread starter):
especially the quote about Delta's Simplifares

That's really an important point. It's let AA attract back business passengers it's lost to LCC's, as they said in the article. That's a point not brought up enough in threads about the ongoing curtailment in service on domestic U.S. carriers over the past few years.

If I wanted to really take advantage of the system, I could earn Executive Platinum status with AA for about $3,000 in travel, now with no Saturday night stay required, and qualify for generous upgrades. At these prices and benefit levels should they still be carving the roast beef in coach?

Alfred E. Kahn's predictions in 1978 about the homogenization in domestic air travel has finally happened.
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MalpensaSFO
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 5:43 am

Quoting AeroWesty (Reply 4):
If I wanted to really take advantage of the system, I could earn Executive Platinum status with AA for about $3,000 in travel, now with no Saturday night stay required, and qualify for generous upgrades. At these prices and benefit levels should they still be carving the roast beef in coach?

Drama, not one airline on this Earth is still carving Roast Beef in coach....

 sarcastic 
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 5:45 am

Quoting MalpensaSFO (Reply 5):
is still carving Roast Beef in coach

I was making reference to the "good old days" everyone keeps dragging out. Not that I don't miss them myself, but the realities of the market today just can't support it.
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 5:59 am

Quoting AeroWesty (Reply 6):
the realities of the market today just can't support it.

I'm sure that - given the First Class fares - BA (say) trans-Atlantic or SQ or QF trans-Pacific could "afford" to carve the roast beef (in First).

It's just that passengers seem to have decided they want to be isolated in their individual suite seats (the BA "coffins") and eat at odd times, not at formal meal times.

Or - perhaps it is the airlines deciding what they will give the passengers, which may be different from what the pax actually want.

 Smile

cheers

mariner
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 6:09 am

Quoting Mariner (Reply 7):
Or - perhaps it is the airlines deciding what they will give the passengers, which may be different from what the pax actually want.

First we need to learn the definition of the word "metaphor", which is how my roast beef comment was used.  Smile

Second, I was referring to the standards on domestic U.S. flights that have come under such scrutiny and criticism, and how they relate to predictions given out almost 30 years ago, not international first class.

Now that the roast beef controversy has been settled (hopefully), what does anyone think of what AA said about their reclaiming business travelers by their new pricing structure, when CO says it's "criminally insane"?
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 6:22 am

Quoting AeroWesty (Reply 8):
First we need to learn the definition of the word "metaphor",

Um - yes, we do understand the meaning of metaphor. We did earn our living as a writer for forty years - twenty of 'em in the US.

So - perhaps there is the possibility that one man's metaphor is another man's hobbyhorse?

Because it would still be possible to serve roast beef (on US domestic and if anyone wanted it) if economies were made elsewhere, such as cutting money losing routes, abandoning the obsession with market share and subsidizing express operations.

But - i could be wrong.  Smile

Quoting AeroWesty (Reply 8):
what does anyone think of what AA said about their reclaiming business travelers by their new pricing structure, when CO says it's "criminally insane"?

My impression is that he was referring to the Y class Simplifares - as Delta's attempt to do battle with the LCC's - see "market share, etc." above - many of which I think were rescinded.

But he could have been obscure and I could have been wrong.

cheers

mariner
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 6:34 am

Quoting Mariner (Reply 9):
many of which I think were rescinded.

I've not watched all of the fares that closely, but the elimination of the Saturday night stay restriction has remained, which was an important part of making discounted fares usable for business travelers. A couple of months ago I picked up a cross-country round-trip on 3 days notice for about $375. I could have returned the next day, or the next week, or the next month, it didn't matter. Those kinds of fares weren't commonly available to somewhat last minute travelers in as many markets as they are today before the fare simplifications came out last year.
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 6:42 am

Aerowesty.....I knew what you meant. For that kinda dough, they should throw in a foot massage as well.
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 6:56 am

Quoting AeroWesty (Reply 10):
A couple of months ago I picked up a cross-country round-trip on 3 days notice for about $375.

You have me an a huge disadvantage - I follow the pricing at AMR (or CAL) even less closely than you.

What I am getting from the AMR/CAL debate is that there were aspects of the Delta plan that AMR thought sensible and embraced - of which the "no Saturday night" may be one?

There were other aspects of it that CAL thought "criminally insane" - the actual pricing levels - with which I might agree.

I had, and continue to have, reservations about Delta's overall policy. I think that CEO Grinstein was so determined to avoid Chapter 11 that he latched on to anything that might save them from it, without reference to the bigger picture.

For him, I think Chapter 11 was the Big Picture.

Thus, the Simplifares - the good and the bad - were adopted wholesale, without sufficient consideration to the good and the bad. Similarly, I think their hurtle to international service has some seriously controversial elements to it.

Consequently, I think anyone can look at the Delta policy and find different things in it, to praise to to criticize. As has happened.

AMR may have taken some of the "good" elements, but I think CAL's criticsm of the "criminally insane" elements is still valid and does not reflect on AMR.

cheers

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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 8:09 am

Quoting Mariner (Reply 12):
What I am getting from the AMR/CAL debate is that there were aspects of the Delta plan that AMR thought sensible and embraced - of which the "no Saturday night" may be one?

There were other aspects of it that CAL thought "criminally insane" - the actual pricing levels - with which I might agree.

That may very well be true, and just from that article alone, I don't think either of us could get a clear distinction of which parts CO was referring to in that statement.

I would gather that the fare over the same routing I took for a short trip before the new pricing came into being would have been north of $1000, instead of the price I paid. Multiply that over any number of passengers traveling a given route at close-to-date-of-travel fares, and something has to give somewhere.
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 8:44 am

I think the key discintion as to the AA/CO vis a vis DL SimpliFares issue that the article doesn't really go into too deeply as that AA did not just adopt DL's new pricing structure wholesale. AA has said quite clearly on several occasions that it did regard DL's complete elimination of Saturday-night stays and the fare cap (which fuel prices have subsequently forced up) were bad business decisions -- ones that AA did not follow. AA's new fare pricing structure has been different -- it still charges fares above DL's imaginary "cap" if it feels it can, and still has a multitude of requirements (including the dreaded Saturday-night stay) on some fares, thus producing a much better revenue effect than DL experienced.
 
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 8:58 am

Quoting Commavia (Reply 14):
AA's new fare pricing structure has been different -- it still charges fares above DL's imaginary "cap" if it feels it can, and still has a multitude of requirements (including the dreaded Saturday-night stay) on some fares

Just as a point of clarification, is that weighted more towards "fare classes" or "markets"--as I can pull up any number of markets served by AA from PDX where there is no Saturday night stay required, except for flights to their hubs.

For example, I could fly on AA to the east coast on an "S" fare departing on Monday via either ORD or DFW for half the cost of flying only to either ORD or DFW, without any Saturday night restriction.
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 9:04 am

Quoting AeroWesty (Reply 15):
Just as a point of clarification, is that weighted more towards "fare classes" or "markets"--as I can pull up any number of markets served by AA from PDX where there is no Saturday night stay required, except for flights to their hubs.

Notice how I said "on some fares" ...  Smile
 
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 9:14 am

Quoting Commavia (Reply 16):
Notice how I said "on some fares"

Yup, I did. I just couldn't find a market where the old fare structure was still in place, except for some limited one-way walk-up fares. I'm assuming that "some fares" referred to AA not introducing DL's CVG model, for example, into place at DFW and ORD, which is what I wanted to clarify just for general knowledge.
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 9:18 am

Quoting Mariner (Reply 12):
I had, and continue to have, reservations about Delta's overall policy. I think that CEO Grinstein was so determined to avoid Chapter 11 that he latched on to anything that might save them from it, without reference to the bigger picture.

For him, I think Chapter 11 was the Big Picture.

Thus, the Simplifares - the good and the bad - were adopted wholesale, without sufficient consideration to the good and the bad.

I couldn't agree more with this statement. It seems that the legacy carriers often cling to and mistake market share for success. All the while, failing to realize that flying a route that loses money does much more harm than having no presence there at all, especially with the enormus cost of oil.

Anyone with first-grade level math can tell you that the fares that DL capped for domestic routes was not nearly enough to cover the cost of the trip. Hell, they were losing money before simplifares, so what do they do to remedy it?...lower them even more! When you look at it in those simple terms, it's utter "Kelly Bundy" logic. And this is what CAL quite rightly sees as criminally insane.

However, the flip side to that is a look at both carriers networks. CAL has EWR (no real LCC competition, B6 is minimal), CLE (small WN presence) and IAH (no real LCC competition, WN at HOU). They have the ability to charge more because they dominate thos cities with very little competition from LCC's. Unlike DL with focus cities and hubs all along the east coast with heavy LCC (B6 and WN) presence. BOS, JFK, LGA, ATL, MCO, TPA AND FLL. CVG has been cut back almost 30% while SLC has grown some. While ATL and yes JFK are the only true hubs in my first list of cities, the rest are big stations for DL. FL has always been huge for DL, up to 1/3 of revenue at one point. Maybe its time to let some of that capacity go as it is high volume, but low yield. DL will not find the light at the end of the ch. 11 tunnel competing with <$100 fares to FL.
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 3:17 pm

AA still does some "gouge the business flyer for what he's worth." Last December, my wife learned on Thurday that she had to be in Louisville on Monday afternoon. AA wanted $1200 to fly Eagle from ORD. WN wanted $200 to fly out of MDW.

There was no way she could justify a $1200 ticket to the client, even though it was the client that wanted her there on somewhat short notice.

What's worse, she ended the year about 800 miles short of Gold status. The R/T to SDF would have put her over.
 
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RE: AMR And CAL - Different Views

Sat Feb 25, 2006 3:28 pm

Quoting Mariner (Thread starter):
From the JP Morgan airline conference, American and Continental offer different takes on the present airline situation and the way ahead:

That whole conference was terrific. A.netters should especially like the Boeing vs. Airbus issues as portrayed by the Boeing representative.

http://www.mapdigital.com/jpmorgan/airline06/welcome.html for those who want to hear the whole thing.
 
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 12:47 am

Although it would cost me and my friends a lot more time on the street, AA needs to implement competitive labor agreements. I am certain that AA would make a profit if it had CAL's labor agreements in place.

Another problem is the attitude of many front-line customer service employees. This "We're American Airlines and you HAVE to fly us." attitude must go. Some agents are coming around but many still have it. That attitude may be the result of the attitude of management. I don't know.

But AA is definately NOT customer service oriented. If you want warm-fuzzies, go somewhere else.TC
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 2:38 am

Quoting Mariner (Reply 12):
I think that CEO Grinstein was so determined to avoid Chapter 11 that he latched on to anything that might save them from it, without reference to the bigger picture.

Yes, Grinstein tried to avoid CH11 like the plague, and with good reason - the associated costs and risks are enormous.

Quoting Mariner (Reply 12):
Thus, the Simplifares - the good and the bad - were adopted wholesale, without sufficient consideration to the good and the bad.

Simplifares was instituted at the CVG hub for a while before being rolled out nationwide. DL found that the revenue generated improved over the fare structure that was in place beforehand.

Quoting Mariner (Reply 12):
Similarly, I think their hurtle to international service has some seriously controversial elements to it.

I tend to agree with you here...but...while some of the newly announced destinations may seem a little odd - Kiev and Edinburgh, for instance - upon second look you'll find that, if you want to fly from Kansas City to Edinburgh, DL now offers one-stop service...who else does? AA? MCI-DFW-LGW-EDI, and that involves a BA flight.

Quoting TinPusher007 (Reply 18):
Anyone with first-grade level math can tell you that the fares that DL capped for domestic routes was not nearly enough to cover the cost of the trip.

How do you know? If my highest fare previous to Simplifares was $999.00, and I sold only that one ticket per flight, and my highest fare after Simplifares is $499.00 and I sell only those 20 seats per flight, which fare level generated more revenue?

Quoting TinPusher007 (Reply 18):
Hell, they were losing money before simplifares, so what do they do to remedy it?...lower them even more! When you look at it in those simple terms, it's utter "Kelly Bundy" logic.

Southwest offers some of the lowest fares, consistently, out there, and they make gobs of money. Profitability is not a result of revenue generation alone.

Quoting TinPusher007 (Reply 18):
And this is what CAL quite rightly sees as criminally insane.

Executives at CO have stated in the past that their RASM was not negatively affected by the restructured fare levels. While I am generally impressed by them as a team, CO executives tend to whine a lot when others don't play by their rules.
 
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 3:08 am

Quoting LawnDart (Reply 22):
Yes, Grinstein tried to avoid CH11 like the plague, and with good reason - the associated costs and risks are enormous.

The costs are indeed, high. The benefits are fairly spectacular, as United has shown us.

Quoting LawnDart (Reply 22):
Simplifares was instituted at the CVG hub for a while before being rolled out nationwide.

Well - to put it as mildly as I can - something went wrong.

Quoting LawnDart (Reply 22):
upon second look you'll find that, if you want to fly from Kansas City to Edinburgh, DL now offers one-stop service.

Actually, I was thinking more of Venice and Nice.

I know quite a few people who go to Edinburgh in the winter. I don't know anyone who goes to Venice or Nice in the middle of winter. Their economies are geared to tourism.

Both cities started film festivals - one in spring, one in late summer - just to extend their tourist season.

Equally - and I know it is Saturday only service - I have no idea why Delta would start JFK/ACA in April.

I might - might - just accept there is a demand for it in the Acapulco season. But the season ends at Easter.

Acapulco - in August - can be interesting. But the weather is awful, half the hotels are closed and the others are mostly empty.

I wish Delta nothing but good things. I have been grateful to them since the early nineties when a Delta f/a gave me the cure for my first moonshine hangover after a wild night in the Smokey Mountains.

But - they have been doing some things that I would question for some time.

To cut to the chase, I have one eyebrow mildly raised about CEO Grinstein. He may be a terrific guy, with a long and extensive airline history.

But I am not certain that he is a man of these times. I hope to be persuaded that I am wrong.

cheers

mariner
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 3:37 am

Quoting Mariner (Reply 23):
Actually, I was thinking more of Venice and Nice.

I know quite a few people who go to Edinburgh in the winter. I don't know anyone who goes to Venice or Nice in the middle of winter. Their economies are geared to tourism.

Good point, but I think the add'l service to VCE and NCE are summer-only (I could be wrong).

And surprisingly, JFK-NCE service is very high yield, especially in the summer. It is also cut back to 4X (?) weekly in the winter.

Quoting Mariner (Reply 23):
To cut to the chase, I have one eyebrow mildly raised about CEO Grinstein. He may be a terrific guy, with a long and extensive airline history.

But I am not certain that he is a man of these times.

I'm with you on this one, as well...but I am encouraged by the fact that Grinstein has placed some top-notch people in the right positions, and he seems to listen to their advice - a rare commodity in a CEO.
 
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 4:05 am

Quoting LawnDart (Reply 24):
And surprisingly, JFK-NCE service is very high yield, especially in the summer.

That whole area is enormously wealthy - in summer. Eastwards from Nice, the French beach towns of Beaulieu and Villefranche (both "sur mer") rival Beverly Hills in glamorous wealth, then there's Monte Carlo and just across the border in Italy you have exclusive resort towns like Portofino.

This is where the really, really rich go in the summer - when Acapulco (see above) and St. Barts are too unpleasantly hot and it is hurricane season.

Quoting LawnDart (Reply 24):
and he seems to listen to their advice

If they are the ones who were pushing him away from Chapter 11, then they may be giving (have given?) him the wrong advise.

Delta's problem was debt. They had scads of it before 9/11 and after that bloack day Mr. Mullin and his CFO just kept piling it up, believing that cash in the bank would get them through the downturn.

The cost of servicing just the debt was greater then the entire annual revenue of - say - Frontier Airlines.

So by the time Mr. Grinstein took over, the good ship Delta had already hit the financial iceberg.

There was no way all that debt could be repaid, nor was it ever intended to be repaid. Big airlines are seldom debt free.

As long as times were cyclically good - which they always had been - old debt would simply be replaced by new.

But times had changed. There had been a small revolution in airline economics, and it was the internet and the LCC.

And while the threat was not necessarily ignored, it was not treated totally seriously - until it was too late.

cheers

mariner
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 9:32 am

Quoting LawnDart (Reply 22):
Southwest offers some of the lowest fares, consistently, out there, and they make gobs of money. Profitability is not a result of revenue generation alone.

Ok, when is the last time that Southwest LOST money? As I said, DL was losing money BEFORE simplifares and then lowered fares even more, that was my point. Furthermore, WN and B6 are now rethinking their fare structure in the wake of the cost of fuel, etc. You don't see either of them saying, "gee, fuel costs a sh!tload nowadays, lets drop our fares to $25"...well, with you mgiht see that...but you get the picture.
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 2:26 pm

If you want the context to the comments by Jeff Smisek, listen to the conference presentation. The simplifares comments are in the last 15 minutes during the question and answer question, but the entire presentation is worth listening to. CO management was very blunt in their assessment of their position in the industry and their competition. It was very interesting to contrast the CO presentation with the jetBlue attempt to put lipstick on a pig.

The simplifares answer was definately the most entertaining. The "criminally insane" comment was in reference to eliminating the Saturday night stay requirement. Smisek also said Simplifares are still simply stupid, got quite a few laughs when he said Delta got what they deserved, and ended his response by suggesting that Delta needs adult supervision.
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aaden
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RE: AMR And CAL - Different Views

Sun Feb 26, 2006 3:20 pm

AA is fighting with LCCs so they needed to adopted a simplified fare structure
CAL thinks that simplified fare structuring is idiotic, because it wouldn't work for their airline. AA is trying to win back passengers from LCCs by trying to lower fares and adding more incentives. CO is obviously doing something else
both these carriers are on their way to being profitable before long.
they are both doing what is needed to get there.
 
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RE: AMR And CAL - Different Views

Mon Feb 27, 2006 1:55 am

Quoting TinPusher007 (Reply 26):
Ok, when is the last time that Southwest LOST money?

Did I say WN lost money? As an aside, if it weren't for their fuel hedges, WN would probably be losing money right now.

Quoting TinPusher007 (Reply 26):
As I said, DL was losing money BEFORE simplifares and then lowered fares even more, that was my point.

Maybe I'm just not understanding your point...

So let's do the math. DL flies a 100 seat aircraft, and they sell every seat. One seat sells for $999, and the other 99 seats sell for $99. Delta takes in $10,800.

Then, after studying the effects of rolling out SimpliFares and the fact that lowering their highest fares might shift, say, business passengers from their restricted $99 fare to their flexible, say, $499 fare, DL sells 20 seats at $499 and the other 80 seats at $99. Total revenue generated is $17,900, an additional $7,100.

So, DL lowered their highest fares, but generated more revenue as a result. Yes, it's a gamble...they might only sell 2 seats at $499 and the other 18 go empty, but I believe DL has determined that SimpliFares is actually revenue positive.