When I did airline pricing at America West a decade ago, I found that just about everyone I met thought they could do a better job than I. “Why are fares so high? If you lower fares, you could get more people to fly and make more money.” Now US Airways has decided to let people prove that they’re right by lowering fares in Rochester, New York.
In general, it makes sense that if you cut fares, you should have more people flying and then hopefully you’ll make more money. Even if your planes are full, you can cut walk-up fares and sell more of those and less of the leisure seats. The ultimate result is that profit would go up and that’s good.
The problem is that is doesn’t usually work this way. Often the fare cuts won’t bring enough extra to make up for the loss in revenue per customer.
US Airways is going to test this out in Rochester by cutting fares and seeing what happens. It looks like walk-up fares (purchased on the day of departure) will be going down anywhere from 31 percent (in Melbourne, Florida) to a whopping 76 percent (in Jackson, Mississippi). Here’s a chart with all the cities that are getting lower fares:
Cities Seeing Decreased Fares To/From Rochester
|Akron/Canton||Bangor (Maine)||Birmingham||Charleston (South Carolina)|
|Charleston (West Virginia)||Columbus||Fort Walton Beach/Destin (Florida)||Gainesville (Florida)|
|Hartford||Huntington (West Virginia)||Huntsville||Jackson (Mississippi)|
|Louisville||Melbourne (Florida)||Montgomery (Alabama)||Myrtle Beach|
|Sarasota||Washington/National||West Palm Beach|
But it’s not just walkup fares. Other fares are being reduced as well. To Philly, a key market because it’s nonstop, leisure fares will drop 48 percent, for example. That ain’t bad. Down to $198 roundtrip from $378 roundtrip.
I like this move because it effectively tells people . . . “You think you know how to price? Great. Now put your money where your mouth is.” The residents of Rochester now either have to put up or shut up.
It’s also important to note that this was being done in partnership with Rep Louise Slaughter (D-NY) who has Rochester in her district. She’s the ranking Democrat on the House Rules Committee, so I imagine that it can’t hurt for US Airways to build up a little political capital there.
So now it’s up to the people of Rochester. Your fares are now lower by far, but will more of you fly? Will it stick?
US Airways says it will examine results over the next couple of months. For those cities that don’t see a revenue increase, the old fares will come back. For the successful ones, those will stay.
Anyone want to guess which markets will keep the fare cuts?