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United's cut fares spread, threatening renewed airline price war
BUDGET carriers are being met by slashed fares from United Airlines,alarming other full-service carriers who fear a renewed price war, derailing a recent recovery in pricing power, reports Bloomberg.
Passenger revenue for each seat flown a mile, a proxy for airlines' control over fares, had finally started rising this year after a slump triggered by a 2015 price war.
Fare cuts hurt airline profits and the pain is keenly felt by full-service carriers, which face higher costs having increased wages.
Said budget carrier Southwest Airlines revenue chief Andrew Watterson: "There is definitely a broad-based discounting among certain carriers. If one moves and you do not, you could lose a lot of volume and you're worse off doing nothing."
American Airlines and United are matching - and sometimes undercutting - the heavy discounts of super cheap Spirit Airlines, said its CEO Robert Fornaro.
Spirit Airlines' base ticket covers a seat and a small carry-on, like a purse. Seat assignments, water and bigger carry-ons cost extra, says Bloomberg.
American was charging US$25 from Dallas to Denver. A round-trip ticket was $70. The availability of such fares typically is limited.
Passenger revenue for each seat flown a mile, a proxy for airlines' control over fares, had finally started rising this year after a slump triggered by a 2015 price war.
Fare cuts hurt airline profits and the pain is keenly felt by full-service carriers, which face higher costs having increased wages.
Said budget carrier Southwest Airlines revenue chief Andrew Watterson: "There is definitely a broad-based discounting among certain carriers. If one moves and you do not, you could lose a lot of volume and you're worse off doing nothing."
American Airlines and United are matching - and sometimes undercutting - the heavy discounts of super cheap Spirit Airlines, said its CEO Robert Fornaro.
Spirit Airlines' base ticket covers a seat and a small carry-on, like a purse. Seat assignments, water and bigger carry-ons cost extra, says Bloomberg.
American was charging US$25 from Dallas to Denver. A round-trip ticket was $70. The availability of such fares typically is limited.
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