It’s funny. Airlines blame last year’s industry implosions on consumers’ non-stop demands for low fares. Ask any analyst and they’ll say “Transcontinental fares are as low this year as they are were in 1986! Where’s the inflation! The Humanity! The Humanity!”
We can’t be completely to blame though. Three out of four times, a consumer like myself needs to buy a ticket, logs on to Kayak, finds the cheapest fare and buys a ticket. If the bar is twenty dollars higher all around? The cheapest fare still gets purchased and I buy one less fitted oxford at Hollister.
Instead, I think much of the blame lies in aggressive competition. With their fun oil hedge, Southwest often sets the market price by opening service to a city, offering outrageous deals and forcing the competition to match or undercut those fares. Often times, the competition launches their own promotions to keep loyal passengers flying on their product.
Boston is the picture perfect example. Last month, Virgin America started service to Beantown, saturating the transcontinental market and directly competing with American Airlines. Soon thereafter, Southwest announced that they would be setting up camp in the Autumn. To compete with Virgin America? Perhaps.
In kind, American Airlines has now launched its own campaign, offering transcontinental passengers triple the miles on any flight. This means that after only two round trips, passengers can earn free domestic award travel on the airline. That’s a pretty outstanding deal and direct competition to both carriers.
Will this sway the fickle traveler back to American Airlines when Virgin America offers mood lighting and hipsterdome while Southwest provides zaniness and a robust route network? Maybe for the business traveler, but my guess is that the casual traveler will still go with the younger, cooler airlines.