If you fly Delta and you like to buy one way fares on nonstop flights, get ready to pay more. Delta has been moving toward making its lowest fares require a roundtrip purchase on nonstop routes, even in major, highly competitive markets. It also appears to be playing with advance purchase requirements, among other things. Clearly the revenue management team is trying to flex its muscles and increase revenues in a time where they’ve been going down, but other airlines aren’t going along. Apparently Delta thinks that it has enough pricing power to go back to the way things were before low cost carriers started to dictate pricing. That sounds like wishful thinking.
The overarching theme here seems to be that Delta thinks it’s leaving pricing on the table and can charge more. It has done fare increases and even kept some of those in place while other airlines have retreated. That very rarely happens, if ever. But across-the-board increases are clunky and lack an ability to target those who are most willing to pay. That’s why I assume Delta is introducing a roundtrip purchase requirement on its lowest fares in nonstop markets. Let’s go through some examples so you can see exactly what’s happening. I’ll start with one of the most egregious examples, New York City to Ft Lauderdale.
The New York to Ft Lauderdale market is big, and it’s a mix of business and leisure. Sure there’s plenty of business, but you also need to go visit your grandma in Boca. American stays out of this market thanks to its Miami hub, but there is a good mix of legacy, low cost, and ultra low cost options in this market. Here are the number of flights from New York to Ft Lauderdale next Monday (this doesn’t include return frequencies).
I picked a random date in the future (July 13) with a return a week later (July 20) to show you what has happened to pricing in this market in the last month. I chose JFK here.
|Pricing Date||One Way||Roundtrip||One Way Premium
Based on R/T
It’s important to note here that there was no fluctuation in availability. This is always pricing the lowest filed fare in the market. There are also no Basic Economy fares involved at all. Delta has effectively made three big moves over the last month that have dramatically changed its positioning in this market.
- Delta introduced a new, lower fare that required roundtrip purchase.
- Delta then converted only its lowest fares into requiring a roundtrip purchase
- Delta then converted even more of its lower fares into requiring a roundtrip purchase
The end result is a massive increase in the one way fare while roundtrip pricing has actually even gone down a bit from where it was a month ago. This is good news for those who buy roundtrip tickets, but it’s not for those who buy one way.
You might wonder if this has anything to do with that multi-city pricing mess that I wrote about last month. It’s possible. The airlines have mostly, if not entirely, walked away from that change. Remember, the original point was to prevent people from combining a cheap fare in two markets with ultra low cost carrier fares (like DC to Dallas/Ft Worth and Dallas/Ft Worth to San Francisco) and combining them to create a really cheap connecting fare. Changing fares to require a roundtrip purchase does help to eliminate that issue, but the impact on Delta’s pricing would seem to be too great for that to be the primary reason for this change.
The example I used is pretty dramatic, but the scale is not indicative of what’s happening in every market. Yes, low one way fares seem to be disappearing in most if not all nonstop domestic markets, but the differential isn’t quite as large in most as it is in New York to Ft Lauderdale. For example, using pricing from May 4 (yesterday) for travel at least two months out (had to fluctuate to find lowest fare availability), here’s how Delta was pricing.
|Route||One Way||Roundtrip||One Way Premium
Based on R/T
|LA – San Francisco||$162.10||$224.20||45%|
|Salt Lake – Vegas||$134.10||$168.20||59%|
|Detroit – Orlando||$191.10||$182.20||110%|
|Minneapolis – DFW||$181.10||$156.20||132%|
|Atlanta – Baltimore||$186.10||$172.20||116%|
|JFK – Portland (OR)||$280.10||$460.20||22%|
Now what’s interesting here is that the percentages may be all over the place, but the flat amounts aren’t. Except for Minneapolis to DFW, the roundtrip price is either $100 or $200 below the cost of buying two one ways for the same flights. I thought it might be distance-based, but then I saw the longer Portland-New York flight had only a $100 premium. I’m not exactly sure what the pattern is, but there clearly is some method to this.
You might be mad to see the return of old pricing practices, but I’m mostly just fascinated. See, the most remarkable thing about this is that Delta is now making itself highly uncompetitive in an industry where pricing parity has always been considered important. Let’s look at LA to San Francisco, a route flown by American, Delta, Southwest, United, and Virgin America frequently. For travel on July 10, American,
Delta Virgin America, and United are charging $112.10 to go one way. Southwest is at $122.98. And Delta? Delta is charging $172.10. (When booked as a roundtrip, Delta matches the Southwest fare.)
Delta is doing some really interesting experimentation right now. The airline took a fare increase on some fares even though other airlines didn’t go along. At the same time, it’s playing this game with one way fares and tweaking other fare rules to try to extract more revenue. I suppose Delta is thinking that its product is now good enough that it can justify a fare premium, and it’s going to target the increases at those most likely to pay (business travelers buying one way fares in nonstop markets). With the notable exception of the cases where one way fares are higher than roundtrip (that just invites fraud), I have to give Delta credit for trying to lead the way in terms of pricing. But at the same time, I’m highly skeptical that it’s going to be successful.