NWA Not Happy With DAL New Fare Structure

NWAFA · Thu Jan 06, 2005 3:47 am

: Flairport,

MSP-ANC is 5 hours fligh time, not 7. Only the 15-25 year group is going on and on and on and and on and on and on and on about the IFE issue. I too wish they would bring IFE back, however with saving OVER A MILLION DOLLARS, I am glad that is one area we are saving..

Hey : Ilsapproach,

Frist of all, Thank you for flying Northwest...but are you aware that the following airlines serve MSP also. So you DO HAVE MANY CHOICES.

United
American
Delta
America West
Air Tran
ATA
Frontier
Air Canada
US AIR
Midwest Express
Sun Country
Champion
KLM

mtnmanmakalu · Thu Jan 06, 2005 4:05 am

NWAFA-

You forgot the Daily except Sunday Icelandair flight.....

mtnman... Smile

NWAFA · Thu Jan 06, 2005 4:09 am

Mtnm,

Oh yea, please forgive me for not including ONE MORE airline that serves the MSP area!

moman · Thu Jan 06, 2005 4:09 am

This is nothing more than competition. Ford doesn't like it when Chevy lowers their prices either. And yes, Ford has issued press releases about the damage of the automobile incentive wars.

Now back to airlines, I think this is great. Fares should be more simple, but so should the US tax code. WN has done well because they have their 5 or 6 fare classes listed. When the cheap one sells out, you must either buy a more expensive fare or travel at another time. WN has also been successful through marketing in getting travelers to believe they are getting lower prices. The legacies often have the same or similar prices, but the "unclarity" of their fares always frustrates people who can't tell if they are getting a good deal or not.

The lowering of the ticket change fee is overdue as well. I personally think it should be nothing more than administrative costs, say $10-15. I strongly disagree with US Airways assessment that a airline ticket is like a movie ticket, use it or lose it. The trouble is I can sell my movie ticket or give it to a friend. Ever try to transfer a non-refundable ticket to someone?

Clarity in fares and prices will restore trust in the industry.

Moman

Mikey711MN · Thu Jan 06, 2005 4:14 am

NWAFA, don't forget about one of your long-time COdeshare partners... Big grin

(just ribbin' ya...point well taken!)

-Mike

NWAFA · Thu Jan 06, 2005 4:16 am

Hey Mikey,

Thanks for reminding me of ONE more! Im still waking up, need another cup of coffee.

Yikes that now makes 15 airlines besides NWA at MSP.

uadc8contrail · Thu Jan 06, 2005 5:03 am

wouldnt it be nice to have WN as the 16th carrier to grace the overpriced skies of msp.......one day it will happen

NWAFA · Thu Jan 06, 2005 5:06 am

They will be there with the code share with ATA.

And if you would do your home work and read the reports (independent too) MSP is not "over priced" compared to other cities like, DEN, ORD, IAD and DFW.

uadc8contrail · Thu Jan 06, 2005 5:12 am

NWAFA,
can you post a link to these independant reports????

bucky707 · Thu Jan 06, 2005 5:14 am

NWA has a lot of nerve. 7, maybe 8 times since 9/11 other airlines have tried to raise fares, and each time it was NWA that refused to go along.

NWAFA · Thu Jan 06, 2005 5:14 am

Go search for your self, they have been posted over and over and over and over and over and over.

planemaker · Thu Jan 06, 2005 5:14 am

CNBC just announced that NWA stock is down 10% in trading (the whole airline index is down) due to Delta's announcement.

isitsafenow · Thu Jan 06, 2005 5:16 am

Padcrasher said that NW and DL operate in totally different markets. In Indiana, Ohio and Michigan, going SOUTH, the big two are NW and DL. They haul the most people, excluding CO out of CLE. There are other also-rans but lets talk big dogs.
Different markets? FNT,LAN GRR,TOL,CAK,DAY,CMH,SBN,FWA,IND,EVV,AZO to the southeast USA. Differant markets? I might as well toss in GBB and MSN, too. Now, take a wild guess which two airlines carry the most people between mentioned stations? I call that competition....head-to-head competition. What do you call it?
safe

uadc8contrail · Thu Jan 06, 2005 5:17 am

NWAFA,
sorry...i assumed that if you posted something about reports that you would have remembered the web sites.....my bad...

flyabr · Thu Jan 06, 2005 5:35 am

the folks who run NWA sure are a funny lot!! they resist fare simplification and most recent attempts at fare hikes by other airlines...but then they go and initiate the counter and 800 number booking fees!! go figure ... Sad

cloudy · Thu Jan 06, 2005 5:36 am

Didn't America West get back on their feet by doing something like this?
The reason American's attempt to simplify the system a long time ago failed was because the other airlines started a fare war to get them to stop doing it. I can't see that happening this time. As has been said before, when competitors don't try to spoil it this is revenue neutral or positive. The reason is because people are more willing to buy unrestricted (as opposed to bargain-priced restricted) fares when they are priced reasonably. This is the revenue-side part of the Low-Co business model. Since Delta's main competitors are already doing this - I fail to see how Northwest could stop them even if they did have the money for a fare war. Delta's main competitors are Airtran, Jetblue, and Southwest, in that order. Northwest and its buddies in Continental cannot hurt them nearly as bad.

This change is way overdue, and WILL them back business in the long term. People HATE the legacy carrier's complex fare structure. It should be simpler yet - even having "only" 6 coach fares is a bit byzantine. The only question is whether it will be revenue positive or negative in the short term. My hunch is that it will be revenue positive.

IN SHORT... The legacies are addicted to complexity just like an addict is addicted to his dope. Revenue side complexity in fare structures hurts just as much as cost side complexity. Its good to see at least one legacy go "cold turkey". I just hope the withdrawal pains won't hurt them to much.

TWFirst · Thu Jan 06, 2005 5:51 am

>>NWA has a lot of nerve. 7, maybe 8 times since 9/11 other airlines have tried to raise fares, and each time it was NWA that refused to go along. <<

Yes... the NERVE of NWA... Insane

It amazes me that people are bitching about NWA not lowering fares.... yet I've seen just as many posts on here that airlines need to raise fares or "customers need to pay more".

SO WHAT if NWA refuses to go along??? Delta can go right ahead and charge whatever it wants. Guess what... if NWA starts losing business to Delta, they'll lower their fares.

mariner · Thu Jan 06, 2005 5:53 am

TWFirst:

Well said.

cheers

mariner

planemaker · Thu Jan 06, 2005 6:09 am

CNBC repoprts that NWA is down just over 11% for the day versus 6% for DL... interesting. Airline index down 12% for the day.

Comment was also made that US Airways will be airline most affected by DL's fare move since 60% of US Airways' fare revenue overlaps with DL.

m404 · Thu Jan 06, 2005 6:16 am

Point One - The NWA response was obviously based, and states so, on the rumors coming out from the media and not fact from DL. Follow the lines of new info as it is added in this thread and you will see readers doing exactly the same thing. All Legacies know fare cuts are inevitable. It's just getting time to be financially prepared to do it that is today's battleground.

Point Two - Most of the times that you've seen NW be "The Spoiler" to fare initiatives it has been towards bids to RAISE them, not lower them. Certainly there have been prime examples of a new carrier coming into a NW market with lower fares where they have "gloves off" defended that territory with full transparency and then gone back to the old fare after the usurper was vanquished. Shameful? Possibly. Embarrassing? Yes. Good business? Questionable, if ethics are in business. Did that help NW retain funds? Up to now. Did it cause customer resentment? Most likely.

Point Three - Back to the end of point one. No Legacy is going to be ready at the same time for this nationwide restructuring. It will depend on forces pulling on the weakest that may pull down stronger companies and that is what I feel NW is referring to in the original note that again was based on a lack of knowledge of the complete plans.

Mikey711MN · Thu Jan 06, 2005 6:17 am

Comment was also made that US Airways will be airline most affected by DL's fare move since 60% of US Airways' fare revenue overlaps with DL.

Then I definitely stand by my assertion that while this isn't necessarily a revenue enhancing manuever by DL in the short-run, removing US from the picture will impact both DL's revenues and their yields disproportionately more than the other majors, positioning themselves to be revenue positive in the long run.

mariner · Thu Jan 06, 2005 6:26 am

Mikey711MN:

So what you mean is that in order for this to be revenue enhancing for Deltas, US Airways has to die?

I'm not arguing, just clarifying.

cheers

mariner

Mikey711MN · Thu Jan 06, 2005 6:34 am

Mariner,

Yes, along those lines. That is, I believe DL has the most to gain from US's removal of itself from the aviation marketplace (based on CNBC comment that Planemaker posted), and the subsequent reshuffling. In my opinion, the drop of excess capacity particularly in the East would result in a substitution of mostly DL equipment (at least as a percentage of the market considering the remaining players). Then DL stands to gain the resulting increased yield because they obviously won't ramp up (nor would they desire) to what levels US had there route-for-route, thus a net decrease in supply.

Also in my opinion is why I think NW is making the biggest stink...at least enough to issue a press release. They have very little to supplant an operation there by comparison, so what monies they'd continue to lose if forced to match this pricing structure could not as easily be offset by the removal of an airline from the marketplace.

Hope that makes sense...I wrote along similar lines in Reply #49.

-Mike

flyabr · Thu Jan 06, 2005 6:36 am

i think one or even two majors need to kick the bucket before the industry will finally recover...

Mikey711MN · Thu Jan 06, 2005 6:40 am

Mariner,

To continue my point just a tad, I was mostly initially responding to this set of data that was posted above:

Estimated revenue shortfalls for major airlines in 2005, based on industrywide adoption of Delta's overhauled fare structure, which reduced some fares by as much as 50 percent. Industrywide domestic revenue totaled about $70 billion in 2004.
AMR Corp. (American Airlines) - $600 million

Continental Airlines Inc. - $250 million

Delta Air Lines Inc. - $600 million

Northwest Airlines Co. - $400 million

UAL Corp. (United Airlines) - $500 million

US Airways Group Inc. - $200 million

Source: Merrill Lynch

What struck me from this set of figures is the assumption that US makes it through all of 2005. While I'm no airline pricing analyst, I am an engineer that runs analyses on other things enough to know that when you remove an element from the model that it must be rerun, so I asked myself how these numbers might change (and what factors are involved in them changing). From a simplistic standpoint, one might see DL as committing suicide: why give up $600M in revenues? But when looking at this as a dynamic model, noting that increased yields resulting from a reduced supply will trickle through to each of these numbers proportional to their respective stake in where the supply was left out, it seemed plain enough to me that DL expects the downfall of US and resulting yield boost geographically applied to the East to impact their revenues in a positive direction.

-Mike (again)

mariner · Thu Jan 06, 2005 6:59 am

Mikey711MN:

I guess I agree - at least, with the US Airways part. Certainly, it would help Delta heaps, but I would have thought that Southwest - especially with the move to PIT - would do well, too, and probably JetBlue/Airtran.

And I have no clear idea as to why US Airways is still flying. Chairman Bronner said that the company would be worth more to the creditors if he went Chapter 7 rather than a second Chapter 11 so - why didn't he?

That said, I am still puzzled about the Delta move, especially since they have denied that they want to increase market share.

They say they don't want a bigger cut of the pie, but a bigger pie (which would mean their cut would be bigger).

I'm not sure about that. I don't know how much bigger the pie can get, at least in the short term.

And I'm not sure I buy it. They're not fools at Delta - they must be aware what this move may do to the weaker sister(s), and that the other majors aren't going to stand idly by.

It will be interesting to see what NWA does. It would be very much out of character if they do nothing.

cheers

mariner

Midway2AirTran · Thu Jan 06, 2005 7:37 am

Many different standpoints to this..

NWA crying foul, doesn't like or agree with it, but oh well. Issueing a press release like that seems to be a bad idea since that reaches the flying public, media, the investors etc.. NWA tends to get enough bad publicity as is!

I believe it is a good move for DL's part, good PR and getting all the media attention too. Lower last minute fares would also provide less incentive to buy the advance purchase, hence creating more revenue by the numbers; instead of relying on just a shrinking few willing to pay $1000 while others look for LCC's or alternative forms of transport.

AirTran would mostly be left alone since their caps are still lower than DL's proposed caps and FL's established LCC niche, this might even stimulate more air travel to benefit both carriers, sort of like the "Southwest effect."

supa7E7 · Thu Jan 06, 2005 11:41 am

Merrill Lynch thinks it is qualified to estimate revenue impacts within hours. Hahahaha. They are not qualified to even begin such an estimate.

m404 · Thu Jan 06, 2005 11:47 am

Lets see now. Last year NW told employees they wanted 950m in concessions. Since negotiations began fuel has gone up some 20+ percent and now it's estimated the new DL fare structure will cost NW 600m. I'd say it's back to the drawing boards AND the negotiation tables. And not just for NW.

Iflewrepublic · Thu Jan 06, 2005 12:04 pm

NWAFA,

You and I both know how people bitch about Northwest...it's plainly obvious anytime we are in the MSP terminal. The truth of the matter is - Northwest was, is, and always will be the unofficial whipping boy of the industry. You and I both know that no one is FORCING people to fly Northwest. For those who happily CHOOSE to fly us, I say "Thank You." For those who fly us because "there's no other alternative," look around.

Iflewrepublic.

F9Fan · Thu Jan 06, 2005 3:33 pm

Does anyone remember NW's actions when F9 announced MSP-LAX last year? Within an hour of the flight times being announced, NW put planes on that exact route at those exact times. To rub salt in the wound, NW also announced DEN-LAX flights, even though NW has no hub activity in either city. When F9 dropped the MSP-LAX route, NW nearly doubled the fare on that route. NW is acting very stupidly in regards to the DL fare structure. This will kill them, especially in the business travel market which has become much more price sensitive in the last five years.

By the way, TZ serves MSP, and with the looming WN/TZ merger, this would give WN a toehold at MSP. NW was trying to knock out TZ by starting a mini-hub at IND, but WN may have saved the day there with their merger.

F9Fan

isitsafenow · Thu Jan 06, 2005 11:03 pm

F9FAN..
As far as business is concerned, Northwest Airlines is ruthless in protecting "what's theirs" and battling the competition. I like that.
You don't sit back and get eat up by competitors nipping and gnawin' at you until you discover you lost market share. You head em off at pass...before they get established. NW did make a mistake at MKE and let Midwest have the market while they regressed. Then they woke up. Also, like a shark moving in at the smell of blood(chapter 11) they grew IND.
People bash this company. I don't know why. Hell, Southwest does the same. They have had USAIRways in their sites for three years now. Look at the cities they have gone into the past 36 or so months. USAIRways cities in the north and south. Wheres METROJET? Can you figure out why? The answer is simple and one word.....HERB.
NW acting stupid? HMMMMMM..They are saying what the wall street gang is saying. How is this(DL new approach) going to put more $$$ in the coffers?
Like I posted before, Delta has bodies on their planes, the load factors are there.....they need money and crashing prices ain't-a-gonna-done-it.
safe

goingboeing · Thu Jan 06, 2005 11:34 pm

People bash this company. I don't know why. Hell, Southwest does the same. They have had USAIRways in their sites for three years now. Look at the cities they have gone into the past 36 or so months. USAIRways cities in the north and south. Wheres METROJET? Can you figure out why? The answer is simple and one word.....HERB.

You neglect to mention one thing in your citation....when the competition ceded to NWA, the fares went back up and frequency went back down. When US scaled back BWI in response to Southwest, Southwest fares remained the same. That, in a nutshell, is why NWA is bashed.

isitsafenow · Fri Jan 07, 2005 3:55 am

They all play that game... When Braniff one shut down in May of 83, Mr Crandell very quietly raised fares on routes that AA and BN parallel, nine per cent the next day.
NW pulled a fast one about five years back at DTW when Reno Air came off the DTW-RNO route. The cheap round trip fare was $199.00 then ballooned nicely after NW was the lone eagle on said route.
thx
safe

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