US Airways Dividend Miles (Pre-2005 America West merger) - The "low Cost Carrier" myth

It's happened again. I fly out of BUF, which is also a city for Southwest, JetBlue, and AirTran. I was happy when these guys came to Buffalo, since prices tended to drop.

Last year, I wanted to get to either Birmingham or Atlanta and back on a regular basis. Tried out the cheapos. Guess whose price turned out to be lowest? US.

I'm doing a European trip at the end of the year, and the "bookend" part is going to require travel between SFO and BUF. Well, Southwest uses OAK, which is actually more convenient, and so does JetBlue. And, lookie here, JetBlue is running a 50% sale!

Wow! I should be able to make out like a bandit, right?

For a basline, (since the trip was open jaw) I called US res and the nice person there led me through the possibilities, even finding a more convenient (and cheaper!) routing by using United for part of the trip.

Total fare with US, ~$242

Best fare from JetBlue (big sale!) ~$385
Southwest ~ $380

Now, maybe I'm not using their website properly (how can you screw that up?), but my history has been that, on the routes I use, US is consistently the cheaper (and certainly more desirable) choice.

The bad news, of course, is that this might be what's putting them out of business. But until then, I think folks who blindly jump on the LCCs "because they're cheaper, right?" are doing themselves a disservice.

Shrewd observation indeed. It's been happening in Europe for a while. A colleague of mine has been travelling to London virtually every other weekend for a two months. In the same period, I've made the same journey every week. Despite taking more flights, I have spent less money on travelling EDI-LHR on BD (lounge access, miles, free meals and drink in coach, operational upgrades, seat assignments, telephone check-in, etc) than he has taking EDI-LGW with Easyjet (no benefits). Walk-up fares on Ryanair and Easyjet are astonishingly high and yet people persist in booking them because they are "low cost".

I agree completely, I have never found SWAs fare to be that remarkably low. Even to high end places like Vegas they run concurrent if not more than the Legacy carriers and they offer less... no wonder SWA is making a profit, they are charging the same and not giving you anything. People, in general are stupid, they will actually believe that if a company says they are cheap, appears to be cheap, and does things cheaply, they must be cheap - is not the case, its all smoke and mirrors kids...

Agree also that whenever I've looked at jetBlue, I have never been able to find a really cheap fare that would make me jump over.

What people don't seem to realize is that "low cost" refers to the internal cost structure of the airline, and not to whatever it costs you to buy a ticket. So WN/B6/FL are certainly "low cost carriers" because their costs to operate are significantly lower than those of any of the full-service carriers. LCC's are thus able to make a profit with significantly less revenue than the full-service carriers - they know this very well and price their tickets accordingly.

The traditional airlines more or less operated as an oligopoly. LCCs operate outside the "club" and charge lower fares when they enter a market, which the others are forced to match. Once established, however, I fully agree their fares aren't typically cheaper than the majors, except for the traveler who pays walk-up full fare coach.

Try to explain this to a devotee, even with concrete examples, however, and you'll often get a hysterical (in at least two senses of the word) response, as if you'd challenged a deeply-held religious belief. When I fly WAS-SNA on UA, it's usually 2/3 or less of the price of the nearest comparable itinerary on WN. Blasphemer! Burn him at the stake! The sun revolves around the earth!

Everything said here is very true. Many times I have been able to find the cheapest fare on major airline, rather than a low-cost one. And, often times you will find that many low-cost carriers do the exact same thing that the majors do in smaller markets. Markets that say, only US serves or only US and maybe another airline or two serve, prices tend to be very high. One would think that going to a city that a low-cost carrier serves would provide a cheap fare always, but that's not true.

For example, while pricing an itinerary to Prescott, Arizona, a city where America West is the only carrier, fares have come out at $700 or $800. This is common in some cities that only one airlines serves- you get a very, very high fare. But, I find this just hypocritical! America West is a low-cost airline! Shouldn't they be providing low-fares systemwide? No, they don't. When given the chance, any low-cost airline will just abandon its whole low-cost principal just because they can charge more. When they can, they will.

I think it's something of a stereotype. Any new airline that springs up and that calls itself a "low-cost" airline, is instantly perceived to be. Also, airlines like SW have a stereotype that they always provide the cheapest fare, and it's just not true!

While pricing a recent DCA-BOS flight, I found US, for the times that I needed to fly, to be cheaper than taking Independence out of IAD. Fares were as high as $500 on Independence, a "low-fare" airline!

I recently flew a last minute flight BWI-BDL on US for $203 r/t bought 3 days before. WN was $379.

My wife's sister is getting married in MCI (both for the 2nd time). I found flights from PHL on US for $216.70 RT. My wife's two brothers are poorer than dirt and are concerned about "high cost" of attending wedding.

SIL's new hubby suggested we fly WN "because it's cheaper". Fare on WN was $309.90 and connected in MDW.

I told other family members, fine, you pay $90 extra to fly the cheap airline, I would save money, fly nonstop, earn miles good for travel anywhere *Alliance flies, etc. Supposedly this guy makes $250K a year running his own biz (her first hubby was not a good provider so this is a welcome change). I guess his business acumen is better in his line of work than it is in picking carriers.

(PS I just rechecked fares and WN down to $233.90 due to sale fare of $99+ each way - still more $$$ for less service to my thinking). Also in the spirit of full disclosure I have reserved award seats for my family of 4 on US not because it's a tremendously good use of miles but because I am sitting on a 7 figure balance and my SIL has been known to change her mind - as a US1 I can redeposit the awards if the date changes and I won't be out $400 in change fees. I concede that the change fee area is one place WN offers a better product.

The Southwest effect is often misunderstood. It is not meant to mean that Southwest always has the lowest fares. It is meant to mean that Southwest forces other airlines to match their fares, and as a result, fares on SW routes are lower on all airlines. So, while you may find a better fare on PVD-PHL on U than on SW, it is also true that U was forced to reduce their fares below their costs after SW entered the market. Also, compare the fares for comparable routes for last minute travel to cities with and without SW competition. It will cost you a lot less for a last minute trip for PHL to MSY than from PHL to MEM. Even if the trip to MSY is less on U than on SW, you can still thank SW for your savings, because U lowered their price in response to SW.

What people don't seem to realize is that "low cost" refers to the internal cost structure of the airline, and not to whatever it costs you to buy a ticket. So WN/B6/FL are certainly "low cost carriers" because their costs to operate are significantly lower than those of any of the full-service carriers. LCC's are thus able to make a profit with significantly less revenue than the full-service carriers - they know this very well and price their tickets accordingly.
Exactly, and while the low cost structure carriers are making profits, the majors are losing money hand over fist on identical fares.

It is incorrect to imagine low cost carriers as knights in shining armour saving the consumer from high fares. The moment they've cornered a market you can bet they are the first to raise fares in response to reduced competition. (On the lucrative UK domestic route between EDI and STN, KLM was forced out because of low prices offered by Go, which responded to KLM's withdrawal by tripling its fares back to KLM levels). The main achievement of low cost carriers has been to reduce the industry to the lowest common denominator, stripping out costs and breaking down the market divisions. There's worse to come in the US. Forget Ted, JetBlue or Southwest...low cost carriers in Europe don't even bother with loyalty schemes.

You'd almost think that US management is astroturfing the board :rolleyes:

One more thing that's being missed -- these aren't generally apples to apples fare comparisons. The "cheaper" legacy airline fare generally carries some pretty hefty rules and restrictions that aren't part of the LCC fare. If you price out a truly comparable ticket and take into account the junk fees the LCC starts to look awfully good again.

Of course if you're convinced that you'll never need to make a change you don't need to consider any of that.

On the bright side it does seem like US is starting to "get it" at least in terms of restrictions. A lot of the fares that they're offering in SWA markets are almost comparable on that front these days.

C'mon, Tom --- you know I've been around here long enough not to be a shill for US. :)

Yeah, I know about the restrictions and so forth. For leisure travel, I have a pretty good idea when and where I'm going. OTOH, the SW/JB fares I was quoting were either at least 90 days advance purchase or internet specials. If I would be quoting walk up fares (just to unfairly bolster my case), the differential would have been much higher.

My experience in the past was that I could get a pretty good fare out of US with two weeks or so advance, and at that I usually still beat SW.

However, having said all that, ajamieson still is right on that this sort of thing can't go on forever. My personal opinion (which I've voiced here before) is the the airlines will all sort of meld into some FedAir, with DHS-licensed passengers flying on DHS-issued itineraries on DHS-determined schedules (but we will all be safe!) and the whole raison d'etre of FF programs will just disappear.

Hopefully, after I'm gone. :(

Perhaps the reason why the fares at Southwest are higher is because they have better yield management and already sold out (or have blocked out) of the extreme low fares. They are profitable, after all.

Can you imagine someone starting a major airline today and NOT calling themselves a LCC?

In any event, I wouldn't mind a little more competition in Charlotte...ATA hasn't driven the prices down like some of us hoped.

A lot of this speaks to image and perception. If you use Orbitz,(or better, Side Step) one immediately sees that JBlue and SWA are often not the cheapest. Lately I'm finding AA to be the lowest, especially on day of travel, and with one ways. The other day they had a same day, one way, of 300 bucks for their JFK to Seattle nonstop. The public just doesn't believe they are capable of that kind of pricing.

All this discussion sidesteps one important fact: the so-called LCCs also have substantially lower revenue per available seat mile than the legacy carriers. They make a profit because their costs are lower. US Airways actually leads the industry in revenue per ASM; the reason that they are losing money is that their costs also lead the industry. The LCCs would not have lower RASM if they weren't selling cheaper seats to someone; my guess is that the difference is in their substantially lower walk-up fares.

[QUOTE=ajamieson]Exactly, and while the low cost structure carriers are making profits, the majors are losing money hand over fist on identical fares.

It is incorrect to imagine low cost carriers as knights in shining armour saving the consumer from high fares. The moment they've cornered a market you can bet they are the first to raise fares in response to reduced competition.

Well that is not the case with WN. WN is the largest airline in more US airports than any other. T The highest walkfare fare they have is $299. When they "own" a market you don't see them raising fares. Look at DAL-HOU, DAL-CRP Kansas city-anywhere. Compare the same with US in PHIL. Look at Phil-PVD fares before WN came in.

I live in BOS, and at least thus far my experiences with LCC's entering Logan have been extremely favorable!

B6 came this winter, and I could buy tickets to MCO for roughly $200-$250 even buying them at the last minute. Even Delta Song wanted to charge more, and the legacy carriers were substantially more for last minute tickets.

Similarly Independence Air just started in BOS to IAD. I prefer UA because they have more perks and frills. However, T class (lowest fare) is very limited on UA compared to Independence Air although you can go standby for no fee on the same day. If you are looking for a last minute ticket it is tough to find the T space on UA, but it is plentiful at the lowest fare on Independence. US has kept its draconian $234 fare as lowest pubished BOS to DCA (they don't fly in the BOS IAD market), and they don't even offer cheap Esavers to DCA very often as they did years ago.

Also as noted, LCC's highest fares are substantially lower than legacy airlines highest fares which leads to the knights in shining armour perception factor.

I know legacy carriers can be lower on some routes, and actually I prefer legacy carriers because of FF and in flight ameneties. But I do think of LCC's as knights in shining armour for lowering overall fare levels in markets.

If you want a quick market to play with look up Delta's one-way walk up fare for the 135 mile trip from ATL to BHM.....it'll put you short $400 or more each way and DL is the only game in town for nonstops! NW asks the same fare to connect through MEM! Someone show me an LCC fare for 135 miles for $400 one-way, and we'll talk about rethinking this? This is a prime example of legacy gouging and exactly why LCC's are knights in shining armour from the airline consumer perspective.

Slightly off topic, but paty of the LCC/Legacy debate:

From the USA Today from 14 July:
At airlines like Southwest (LUV) and AirTran (AAI), organized labor is pressing for more pay, better benefits and bigger shares of the profits. Depending on how the labor unrest plays out, low-cost airlines could lose the ability to dictate the ultra-low fares that air travelers in the USA have enjoyed the past few years regardless of which carrier they fly.

No. 5 Southwest, the leading discounter, last month settled a long-simmering standoff with its flight attendants, giving them an average 31% pay increase over the next four years. Nobody is saying the settlement will push the consistently profitable Southwest into the red. But the big raise for flight attendants indicates that low-cost carriers have begun to feel the kind of labor cost pressure that their higher-cost competitors have been feeling for years. Labor is the biggest expenditure for any airline.

Ironically, it's happening at a time when the big, brand-name airlines are slashing their own costs to survive and compete with the game-changing low-cost carriers.

Simultaneous cost cutting by the big network carriers and the rising cost pressures on the discounters lead some industry watchers to predict that the two may, in a few years, meet somewhere in the middle.

That, they say, could lead to further blurring of the distinctions between fuller-service network carriers and no-frill low-cost carriers. And average airfares could end up much higher than they are today.

All the low-cost carriers are growing rapidly. Most are profitable, led by category king Southwest. Collectively they've captured nearly 30% of the domestic market, seemingly overnight, and their market share appears certain to grow.

In contrast, the six big network airlines — American (AMR), United, Delta (DAL), Northwest (NWAC), Continental (CAL) and US Airways (UAIR)— lost a total of nearly $25 billion since 2000. To stay afloat, they've gone deeply into debt and mortgaged assets. They've laid off workers, grounded airplanes, dropped or reduced service on dozens of routes and contracted out lots of small-market flying to regional partners.

Now, as they look for ways to lower costs even more, network carrier executives — and their union leaders — also are counting on rising costs at their low-cost rivals to help narrow the cost gap and to make them more competitive.

Executives at the low-cost carriers dismiss that as wishful thinking. AirTran CEO Joe Leonard said at a recent industry conference in Phoenix that the advantages of the low-cost carriers go "way, way beyond" their lower labor costs.

"We do things operationally that save us money that the guys at the big airlines can't even conceive," Leonard said.

Low-cost carriers, for example, focus on a small number of high-traffic markets. Simpler service networks allow them to fly only one or two aircraft types, keeping training and maintenance costs low. Crew and aircraft scheduling is more efficient because people and planes move point-to-point, not through a crazy-quilt hub-and-spoke network. And they've pioneered lower-cost sales channels such as the Internet.

AirTran's Leonard acknowledges that low-cost carriers' labor costs will rise over time. And, he says, the network carriers that survive will do so by reining in their costs. "But we'll still have a big, big operating cost advantage for a very long time."

Pat Friend, president of the Association of Flight Attendants, agrees. That's why, she says, AirTran can afford to pay its attendants the higher pay they've been demanding for two years.

Cost creep

Yet there is growing evidence that labor cost creep is becoming a problem for the low-cost carriers. Southwest is the prime example.

While competitors cut back after the Sept. 11 terrorist attacks, Southwest continued growing and extended its streak of annual profits to 31 years in the process. That success made it possible for Southwest's heavily unionized workforce to win big pay and benefits increases while many of their counterparts at the network airlines took huge cuts, or lost their jobs.

A senior Southwest captain flying the maximum number of hours on the airline's standard Boeing 737 would earn about $150,000 a year. But extra compensation from the best pilot stock-option plan in the industry and a lucrative profit-sharing program make them the top paid for their type of narrow-body aircraft, says Kit Darby, president of AIR Inc., an Atlanta-based aviation career consulting firm.

Compensation for other Southwest workers has moved into the upper tier of the industry as well. Most recently, the Transport Workers Union, the flight attendants' union, demonstrated the kind of clout workers at low-cost carriers now have. Negotiations grew so acrimonious this spring that CEO Jim Parker called in Chairman Herb Kelleher, still an almost god-like figure within the company. Parker hoped Kelleher could persuade TWU negotiators to back off demands for a deal that would have increased flight attendant costs 40%. Kelleher limited the damage somewhat, but the attendants received far more than the 20% increase in compensation the union claimed management had been offering.

Labor cost pressure is growing at other low-cost airlines, too.

•AirTran flight attendants have complained bitterly about low pay and the inability to reach agreement on a new contract in two years of negotiations. They picketed the company's Atlanta shareholders meeting in May. They say they are particularly upset top executives' pay grew 25% in 2002 and 13% in 2003 while their pay and benefits lag behind the industry average.

•America West, reconstituted as a low-cost carrier over the past three years, had to give its pilots 11% pay increases, improved benefits and larger bonuses tied to productivity in order to win narrow approval in December of a new contract. Flight attendants, mechanics, dispatchers and bag handlers are all seeking big increases in current talks. And the Teamsters union has collected the signatures of more than half of the airline's 3,400 non-union customer service representatives to force a representation election in August.

•ATA Airlines, the second-largest low-cost carrier, is already feeling the pain of rising costs, including rising labor costs. Faced with a possible default on its debt and a potential bankruptcy filing, it asked pilots and flight attendants to forgo large raises their union had negotiated. The pilots agreed to the request and won't get raises that were due this month and in July 2005 that together would have given them $43 million more over two years. ATA's flight attendants are voting this month on pay and benefits concessions worth $8.9 million over two years.

Continental Airlines CEO Gordon Bethune told reporters at a conference in Fort Worth last spring that labor unrest at low-fare carriers should be expected.

"When their companies are making more money than the competition, people expect to be compensated better," Bethune said.

Consultant Darby agrees: "I've never seen a (successful) airline where labor costs didn't increase over the long term."

Convergence

Labor cost creep isn't the only threat to the low-cost carriers' advantage over the big network carriers.

The big airlines that survive their present financial difficulties are likely to emerge as more competitive. That has many experts predicting a near-convergence of labor costs in the airline industry over the next decade.

American Airlines CEO Gerard Arpey told investors at a New York conference in June that "most of the so-called new models are as simple as paying lower wages, providing fewer benefits and capitalizing on the 'juniority' effect of a new workforce and fleet." Arpey excluded Southwest, which, he said, is unique.

American, the world's biggest airline, recently studied cost structures of its low-cost competitors in an attempt to isolate their cost advantage. The study showed that the biggest reason, by far, for the cost gap is the difference in labor costs. Differences in operations, services and marketing approaches generate smaller advantages for the low-cost carriers.

David Neeleman, CEO of low-cost leader JetBlue, calls studies like American's a comparison of apples and oranges. The big airlines can't get close to those of low-cost carriers unless they're willing to change their operations, he says.

The big airlines would have to junk their global hub-and-spoke networks, cut back to just one or two jet models, trash most of their costly marketing programs and learn to operate with far fewer workers per jet if they want to even get close to JetBlue's costs, Neeleman says. But, he adds, if they do that, the big airlines would have to live without the higher unit revenue their powerful global networks now generate. "They're saying, 'We'll take our revenues and your costs.' But it doesn't work that way. If they had our costs, they wouldn't get their revenues," he says.

Former Air Line Pilots Association national president Randy Babbitt, now head of Eclat Consulting, says that the big airlines don't fully appreciate the low-cost carriers' worker productivity and asset utilization.

"The low-cost carriers are ... just a whole lot more efficient producers. They get a lot more work done and serve a lot more passengers, with fewer people and planes than the big carriers," Babbitt says.

In addition to lower average pay, workers at the low-cost airlines typically get fewer paid days off, work more hours each month and have less valuable health and retirement plans, he adds.

That's why Darby expects the big airlines to transition from their defined-benefit retirement plans — currently underfunded by more than $20 billion — to 401(k) plans like most low-cost airlines offer.

Darby says the best way for management to switch to the lower-cost retirement plans is through negotiating with unions. A unilateral decision by management to make the switch, he says, would anger workers and make matters worse.

Says Darby: "The two groups are both moving to the middle. It's the marketplace at work."









Find this article at:
http://www.usatoday.com/money/biztravel/2004-07-13-low-cost-labor_x.htm

Where Southwest shines is in their walk-up fares. I believe I read somewhere that between 35 and 40% of all Southwest tickets sold are sold at full fare. I wonder how that compares to the other airlines?

If you can plan ahead, though, I agree that Southwest is not always the cheapest. Having said that, I have to question some of the examples I've read in this thread.



While pricing a recent DCA-BOS flight, I found US, for the times that I needed to fly, to be cheaper than taking Independence out of IAD. Fares were as high as $500 on Independence, a "low-fare" airline!


According to Independence Air's press release regarding schedules and fares to BOS (http://biz.yahoo.com/prnews/040615/netu029_1.html) their highest walk-up fare was $124.00. Throw in your $3.10 segment tax, a $4.50 Passenger Facility Charge and the $2.50 security fee and you're looking at $134.10 each way or $268.20 roundtrip max. When you say Independence Air wanted $500.00 was that for more than one passenger traveling?


I recently flew a last minute flight BWI-BDL on US for $203 r/t bought 3 days before. WN was $379.


WN's refundable walk-up fare BWI-BDL is $80.00 each way. Your highest roundtrip fare (including all taxes and fees) would be $180.20. Were you purchasing multiple seats or just one?

Mike

According to Independence Air's press release regarding schedules and fares to BOS (http://biz.yahoo.com/prnews/040615/netu029_1.html) their highest walk-up fare was $124.00. Throw in your $3.10 segment tax, a $4.50 Passenger Facility Charge and the $2.50 security fee and you're looking at $134.10 each way or $268.20 roundtrip max. When you say Independence Air wanted $500.00 was that for more than one passenger traveling?



Fare was indeed for 2 people traveling, priced at $225/person (no tax, etc). BUT, compare that to US's $158/person fares (no tax, etc.). Plus, US offers the convenience of DCA, a 737 compared to a RJ, and F class upgrades.

I've found that where the low fair airlines work is for trips that aren't planned long in advance. I live in the DC area, served by Jet Blue and Independence. Southwest and AirTran fly out of BWI which is enough of an inconvenience that I avoid it even if a flight out of IAD or DCA costs $100 more.

What I've discovered is that with the low-fare carriers, the difference in cost between a flight booked weeks or months in advance and one booked a few days in advance is fairly small, if there's any difference at all. Also, they tend to have more friendly cancellation or change fees.

I've been wafflling about going to Nashville for a trade show this coming weekend. I have a hotel booked, but didn't book a flight early. I just checked Independence this morning and I can still fly round trip for $157. The best I can do on Southwest (out of BWI) booking today is $240+ (full fare) US Air is $340+

I probalby still won't go, but it's nice to know that it can still be pretty cheap.

This is all just basic economics, with a touh of marketing acumen added on top.

As noted, "Low Cost" refers to the airline's cost structure, not what it charges consumers. Fares are based on competition, nothing more. Just because an airline has a lower cost structure does not mean that it will charge lower fares; it will charge whatever price it determines to be market clearing. However, as noted the lower cost structure allows LCCs to be competitive at lower prices, and thus they may be able to adpt a yield management model that for certain categories of consumers is more favorable (and for others is similar or even worse). The so-called "Southwest effect" is the impact of a new entrant into a market with increased capacity, not any inherent tendency towards lower fares. The maximum fares stated by LCCs are a marketing tool, and where necessary for competitive purposes legacy carriers can (and will) make similar pronouncements (e.g., AA for some B6 routes, US to compete with WN).

When you visit the US Airways Home Page (http://www.usairways.com) and price out either BOS to DCA or DCA to BOS, searching by price to display all published fares, the lowest fare in the market has been stuck for years at $234. This $234 fare is restricted as well by advance purchase, minimum stay, etc. Once in a great while, I would estimate 4-7 times a year at most, this lowest fare drops to about $158-$178 for either a sale restricted fare or an Esaver. In years past, e.g. 1996-2000, it was much more common to see Esavers and sale fares in this market in the $100-$130 range. At that time DL competed on the route with jets operated as DL Shuttle. Also in the early to mid 1990's NW operated a jet shuttle in the market. Also the meals and ameneties on this route have dropped while the fares have appeared to rise. Right now DL operates on this route with RJ's and they probably have the worse in flight service of anyone on the route (US jets, and DL/AA RJ's). DL operates this route as Com Air, and all they serve you is a very small bottle of water. I thought it was a glitch but it happened on two different DL flights.

On 07/20/2004 I double checked the US home page and the lowest published fare remains at $234 for a W14X77NN restricted fare. From what I can tell, US has not reacted at all in the BOS to DCA market to the introduction of www.flyi.com lower fares to the BOS to IAD market.

I fly 2-4 times a month in this market, and lately, find myself 90% on United paying about $130 with tax for a roundtrip BOS to IAD which is a published UA T fare. I went to UA because of the Around The World promotion and due to better in flight services and ameneties (namely channel 9 and glass cups in first). DCA is much more convenient, and I will still fly US to some extent but if I have time I think UA is running better promotions and offers a better in flight product at least right now. Also UA has a 2500 bonus mile offer for IAD roundtrips where you can earn a maximum of 15,000 miles. Again in the 1990's and early 2000 years US heavily promoted the shuttle with fare sales and frequent flyer offers. At one point they offered a Shuttle guarantee where pax got miles for any shuttle delay or cancellation or any substance. However, lately, it seems US is de-branding the shuttle and making it just like any other main line flight. The snacks used to be a notch above on shuttle, and they used to offer bottled beer which is gone too. Also especially at DCA, even on shuttle, they often now close the door 10 minutes prior to scheduled departuretime. That flies in the face of the 1980's 1990's image of the Type A person running to catch a shuttle 2 minutes before departure :). Even if they see in the computer there are pax sometimes especially DCA will still close the door 10 minutes early as management has directed them to do that. And they don't even offer token compensation if you miss your flight. At least if people miss there flight and it closes so early they should offer you a meal voucher as a "feel good" sort of gesture. I have not flown Indy Air but wil test it out just for the heck of it even though I'll probably stick with US/UA just to try it. Also I would like to try the AA shuttle too to see what it is all about.

Northwest to Chicago provides an interesting picture of what a low-cost airline can do:
(These numbers are from when I was flying these routes from about a year back, so they may be somewhat different now.)
MDW-DTW - top fare $200. NW had about the same frequency as WN along with the same fares and restrictions
ORD-DTW - walk up fare around $400. NW was competing with AA and UA.

MDW-MSP - walkups between $200 and $800. NW had very limited competition from TZ. Peak times or times not near a TZ flight were expensive, while those in heavy competition were more expensive.

ORD-MSP - walkups around $1000. Some cheaper flights could be found with restrictions, advance purchase, and limited times and availability. NW, UA, and AA all have flights about every hour.

Clearly, the low cost airline had a significant impact on the MDW-DTW route. With the high frequency of flights on MSP-CHI, the impact of the low fare airline was very minimal. (There just wasn't enough low-fare traffic to make a difference.)

The other key benefit of the low cost airlines is price caps. On thin routes like CHI-SLC: DL, AA, and UA all have a few flights a day. Walk up is up in the $1k range. Even connecting with other airlines is around the same price. Southwest, however, caps at around $600 rt, and flies once a week nonstop, with 1-stop flights more often. Thus offering a significant saving for last-minute travel. Though for advance purchase, it's still easier to find cheap flights on the big three from Ohare.

On 07/20/2004 I double checked the US home page and the lowest published fare remains at $234 for a W14X77NN restricted fare. From what I can tell, US has not reacted at all in the BOS to DCA market to the introduction of www.flyi.com lower fares to the BOS to IAD market.


From the foregong, I would conclude that US considers IAD and DCA to be distinct markets. At the margin here is undoubtedly some impact of the added capacity from Independence Air flying a few RJs daily WAS-BOS, but just as with AirTran (I believe) flying BWI-BOS the impact is likely minimal, and US can probably combat this through inventory instead of price management (i.e., adding more seats at lower fare classes, not lowering fares). The Shuttle is targeted at a premium business customer, and from what I understand many passengers are on negotiated corporate fares and are thus essentially captive. These customers also place a high premium on DCA over IAD. As DL downgrades to ComAir, US faces even less competition. Essentially, US is competing on convenience and service, not price--and the food & drink service will only be as good as is necessary to be superior to the competition.

Looking at PHL I think the LCC's have had a tremendous impact. They have forced US to lower it's fares significantly on competing routes. If one looks only at booking a ticket today that person will not see any difference in price between US and a LCC like WN or FL. On some occaissions US may be cheaper because WN has sold out in the lowest fare bucket. (It's often easier for WN to sell out it's lowest bucket before US because WN may only have 1-2 flights/day to a destination while US could have 5-6.) However, the LCC's are the reason why fares have dropped.

Look at PHL. Before FL began direct flights to BOS for $44 US was outrageously expensive. Now that WN is flying to PVD and MHT, fares to those airports are dirt cheap on US.

Flights from PHL to Florida destinations have generally been low because there has always been some competition, even at PHL. However, since FL's growth at PHL on it's Florida routes the fares have been consistently under $200. Now with WN's arrival it looks like those low fares will be with us even longer.

But the biggest change I've noticed are the PHL-PHX flights. Before WN's arrival this regularly priced on US or HP (which I have never considered a LCC) at over $400 RT. Sometimes you'd catch a system wide sale and the fare would drop to $250 (plus taxes and fees). Now, RT flights are $200 on a regular basis.

Seems to me the LCC's have done exactly what they claim: provide low cost flights to certain destinations. They don't claim to provide much else. But, for 90% of travelers low cost is the most important factor. Most people do not fly for business and get thousands of FFMiles per year and free upgrades. I'm only a leisure flyer with about 2 trips per year. I am a US Dividend Miles member, but I have no preferred status, and no hope of ever getting it. I have no hope/expectation of ever getting an upgrade unless I use miles. I don't have enough miles to use for regular upgrades (I am saving for an award flight).

To me (and the 90% of travelers like me) there is no great difference between US and WN. Coach class is coach class. It sucks on any airline. Neither US nor WN serve food. What do I get from US that makes them better than WN? If I'm going coach I'm going to fly whoever is cheaper. I am going to reward the company that does the most for me--which is usually the one with the cheaper ticket.

That being said, if all things are equal (including price) I'll fly US. Why? Because of the ability to get an assigned seat, and the FF program. I have about 60k miles on US and my wife has 35k. Not a lot compared to some people here, but it will get us a free ticket to Hawaii in a few years. These are advantages that I don't feel US is marketing enough. It's a big advantage over WN yet I haven't seen one commercial or ad playing up these advantages. But that is off topic.

My point is simple. In PHL WN and FL have done exactly what they promised. They brought lower fares to PHL. As a leisure traveler I'm thrilled to take advantage of it.