State of the Airlines

Thursday, February 24, 2005

NEWS: Reduced Fares are NOT Killing the Airlines

Today's Hero is Jamie Baker of J.P. Morgan Chase who also gets the quote of the day award. But first...the back story. I recently ranted on the whining and complaining from other major airlines about the impact Delta's Simplifares would have revenue. Today's news supports my position. Airline revenues have beat analyst predictions for January by actually edging up over last years performance while average fares fell. This is with Delta's supposedly devastating revenue impailing fare cuts in place for nearly the whole month. Now...back to Today's Hero Mr. Baker, who is quoted from his research paper Wednesday:
"Perhaps mimicking the domestic pricing philosophy of low-cost carriers and improving the value proposition of business travel though reasonable fares isn't as stupid as recently suggested by one airline management,"

Well put Mr. Baker! I believe this puts the ball back into the court of Jeff Smisek, Continental Airlines President.

Jeff Smisek, Continental Airlines President, was the target of this quote because he called Delta's Simplifare plan "simply stupid" with God and country listening via the Wall St. Journal. I'll be interested to see if Mr Smisek will step up to the plate on this one. Perhaps having a quote in the Wall St Journal that gets knocked down and stepped on will make him a little gun shy about further quotes. Round 1 goes to Delta.

Finally, I'd be remiss if I did not point out that, despite the increase in revenue, the airlines still had a dismal January with with lots of losses. Fuel prices and overcapacity are still taking a brutal toll.

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