American’s Cheap “Advantage Fares” Are Doing More Harm Than Good, Analyst Says
Joe Cortez August 05, 2015
A leading airline analyst claims American’s “Advantage Fares” are creating significant problems for the industry.
Flyers utilizing American Airlines’ “Advantage Fares” are inadvertently creating problems for their fellow travelers. According to leading airline analyst Hunter Keay of Wolfe Research, the legacy carrier’s low fares do more harm than good across the industry.
Keay made the claims in a report published July 31. In the report, Keay says he studied flights between non-American hub cities with at least one connection and found that in 44 of the 50 city pairs investigated, American’s “Advantage Fare” offered an average discount of 49 percent over competitors’ cheapest nonstop flights.
“It’s our opinion that [American] is the main source of [airline financial] weakness,” Keay writes. “Due to re-banking hubs and ubiquitous Advantage Fares.”
According to The Street, the analyst discovered the discounted American fares were still active despite previous accusations by the Department of Justice that a merger between US Airways and American would increase airfares across the country. Keay says in his report that the fact these discounted fares still exist could be contributing to the lack of growth among U.S. airlines.
While the data suggests American is undercutting competitors in many markets, Keay’s report points out that the other legacy carriers are responding accordingly, with Delta Air Lines and United Airlines firing back with deeply discounted one-stop connection flights at dozens of American’s non-stop markets.
The report is released in light of multiple investigations of price collusion among U.S. airlines. In July, the Justice Department launched an investigation into American, Delta, United and Southwest Airlines based on allegations of price collusion. Only a few weeks later, the Department of Transportation announced a probe of the same four airlines, as well as JetBlue Airways, on accusations of price gouging in the aftermath of an Amtrak derailment.
[Photo: American Airlines]
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Hunter Keay is an arrogant, idiotic gasbag who takes pleasure in pushing airlines to screw over customers. Nothing he says reflects business logic in a service industry, but only suits his personal hatred of airline customers.
An example of this article's duplicity.... It says: "previous accusations [were made] by the Department of Justice that a merger between US Airways and American would increase airfares across the country." This wording implies that American's merger with US Airways will increase fares. The actual "The Street" article he cited says the complete opposite: "If the proposed [US Airways and American] merger is completed, ... the Advantage Fares program will likely be eliminated, resulting in higher prices..." (see link - http://www.thestreet.com/story/13240568/2/americans-too-low-pricing-hurts-the-airline-industry-analyst-says.html) The Street's article (and Mr. Keay) is actually saying American's "Advantage Fares" are good for the industry because they are keeping prices lower for everyone. But after the merger, those fares might go away causing prices to go up. This article is very misleading! It's saying (through sloppy writing) that the Advantage fares are bad for everyone. Mr. Keay actually said those fares are good. Common sense says: lower fares in true capitalism are ALWAYS good. The current U.S. airlines environment IS mostly true capitalism (though there appears to be price-fixing -- which is when competitors cooperate in hidden ways to help themselves, at the expense of their collective customers).
This article is badly written and implies American Airlines is doing something bad. The author doesn't make his point very clearly -- that Mr. Keay is blaming AAL for "doing more harm than good across the industry". He does it in a winding roundabout way, mainly by re-arranging the facts (see below) in a different order, to result in an anti-AAL accusatory tone. The article presents these facts: - In several markets, American's one-stop fares are lower than competitors' non-stop fares - In several markets, competitors' one-stop fares are lower than American's non-stop fares - In all cases, the traveling public benefits - The Justice Department and DOT are investigating airline price fixing/gouging - Keay says these discounted fares could be contributing to lack of growth of U.S. airlines So what's the problem? There's none. I'm not a big fan of AAL, but this article is unfairly picking on them. The facts AND Mr. Keay's article (on The Street -- see link above) is actually very different from this version.
To be entirely fair, HK did not say in the report that Advantage fares are bad for travelers, he said that they are bad for airline profits. The first line is, to say the least, misleading.
Flyers utilizing American Airlines’ “Advantage Fares” are inadvertently creating problems for their fellow travelers. Huh?! Mr. Keay is blaming consumers for taking the discount offered by the airlines? I think the airlines are creating their own problems.