Originally Posted by jetBlueNYFL
When an airline like jetBlue or Southwest enter a new market, competing legacy airlines on that route usually match their fares to compete. The way I see this is that the legacy airline has gotten away with "screwing" (in lack of a better term) the customer on over-priced service. If I were a loyal CO customer paying $400 for most of my flights from NYC-IAH the past few years, and then all of a sudden the fare drops to $200...I would not think twice about shifting my loyalty over to the airline responsible for bringing down the fares in the market. After all, it's the jetBlue Effect that impacted lower airfares.
I am not sure how widespread this shift in loyalty would be. OnePass, in fact any FF program, makes customers "sticky." For those that select an itinerary solely on price, well, they were never loyal in the first place!
Originally Posted by jetBlueNYFL
A perfect example of this technique, JFK-BDA. Pre-jetBlue fares on this route were sky-high STARTING around $250 each way. JetBlue entered the market with $129 fares, signifigantly lower then what AA charged...and sadly got away with all those years. So, AA reduces the price to $129 and makes a statement that they did this to show appreciation for their customers for flying AA to the island for 30 years......BS! The real reason was beause jetBlue entered the market and gained market share. Customers are not dumb....they know they are getting a better value on jetBlue. And B6 is to thank for lower fares on those routes!
I certainly wouldn't pan AA for charging $250--it's not really a big fare in the first place! A company will charge what the market will bear. If I follow the reasoning, then if WN arrives into the market and drops the fare to $49, that wouldn't make JetBlue evil! Companies charge what the market can bear. If JetBlue can run things profitably at $129, good for the company!