Originally Posted by
zman
Let me try and figure this out, I am NOT an MBA
DL lost ~$800m in Q1
Charging $50 for a 2nd bag International (what ever that is) will bring in
$100m per year (or $25m per quarter).
So here is the real ?, if non airline specific loyal people buy on lowest all in price, and NOT everyone matches the $50 DL fee ($100 RT), they will loose XXXX in revenue by not selling the $500-$2000 ticket).
If they do not get matched from their major Internaltional Competition (AF,AC, BA,KL,LH,JL,ANA,KE ect) they will loose more revenue they they take in.
I am not sure if you are correct or not, but one thing to point out is that international routes are not competitive. If you live in Chicago and want to fly to Delhi, you have AA as a choice for a direct route. If you live in NYC and want to fly to Bombay, you have Delta (I think). The point is whether or not other match the fee is less relevant than say, if GM raises the price of a sedan and Ford does not.
The airlines pricing strategy is based on what they feel they will lose in revenue vs the additional fees (as you pointed out). The level of loss due to the fees is very route specific. Routes competing with LCCs are price sensitive, and international routes tend to be less so because if you have to go, you go on AA, as they own the route.
I am sure that Delta would like to make this fee route specific, for example, charge those JFK-BOM or ATL-CDG (or wherever they have a monopoly) but not charge it for competitive routes. This would be hard to do, though.
Time will tell if this is a profitable strategy, but you can bet Delta believes, as of today, that it will be.