Originally Posted by
mgcsinc
So, this discussion has kinda gotten buried in the LAS thread, but I think it deserves its own thread. Is UA currently doing some kind of pricing experiment where they are pricing various markets at significantly supracompetitive levels? Folks seem to be reporting ridiculously high fares. I haven't done much searching, I admit, and I'm not actively planning any trips, but I've noticed a bit of this myself.
If so, what's the rationale? Is this the new hold-out-for-last-minute-selling strategy? Is it to test the degree to which people's loyalty permits supracompetitive pricing?
It has been discussed in a number of places, United said on the 4Q 2013 and the 1Q 2014 call that they had changed their RM approach and were going to "hold back" more seats for later sale, hoping to get a premium. They do this by selling less up front for discounted prices. So the decission in intentional.
This has been widely announced (see e.g. today's presentation at the B of A conference):
http://ir.unitedcontinentalholdings....&p=irol-IRHome (under presentations tab).
As I have noted before Delta tried this strategy in 1Q 2013 and fell on their face, said they got "too aggressive" and it cut yields. Delta underperformed in 2Q 2013 (compared to what is has done the last few years) when the bad results of this strategy were felt.
I think its a real mistake, given United's reputation, to be doing this as I think they will end up with many unsold seats and no new HVF traffic will show up. Time will tell.
But it is informative that the first quarter where this stratagy was partially in play (1Q 2014) United got killed, and for 2Q they are only projecting PRASM of +1-3%, while DAL is saying they will hit PRASM of more like +6-7% in May/June.