Chapter 1896： What is the price war for more money

Let alone the pressure of low-cost airlines, after all, regardless of the pressure, low-cost airlines have money to make money, because they control costs to the extreme and it is really difficult to lose money.

But traditional airlines are different. They have a big business. Once they fight a price war with low-cost airlines, they cannot be said to have lost, but they will definitely hurt the enemy by one thousand and eight hundred, which is not too cheap.

Of course, the price war should not be fought, but should be moderate. For example, last year, major American airlines, including American Airlines, United Airlines and Delta Air Lines themselves, tacitly launched price wars against low-cost airlines in an attempt to suppress these. The rising popularity of low-cost competitors has led to an overall decline in North American economy class fares. Passengers will benefit from this, but it puts huge pressure on airline revenue.

What pressure? Of course, it is the pressure of the board of directors and the shareholders. They are all listed companies. For the management, if the performance target is not achieved, or the performance is regressed, the shareholders do not care about your strategic intentions. As long as they lose money, they will spray you without discussing it. .

Under such pressure, the management of the three traditional airline companies can't hold it anymore. How can they fight this long?

Even if Yang Cheng has instructed Bastian not to care about temporary revenue, Bastian is still responsible to other directors and the employees of the entire company. He has been on it for a long time, but the other two obviously do not have him. With such strong support, it is not interesting to retreat first, leaving only the Delta family behind.

The key is that the current environment is too friendly to low-cost airlines. With the reduction of fuel costs, the number of airline flights and the increase in aircraft seats, these ultra-low-cost low-cost airlines have been able to expand rapidly, and the momentum is so fierce that they cannot stop them. The kind of living.

Spirit Airlines doubled its aircraft seats in Chicago and increased its seats in Dallas by 27%. The veteran discount giant Southwest Airlines also increased its capacity in the hub city of Dallas.

This trend has doubled the pressure on the three largest US airlines based on passenger traffic.

In the past, these large airlines usually avoided price wars with new competitors. Now, encouraged by the low fuel costs, everyone has room for maneuver and only then began to adopt strategies to fight back.

Delta Air Lines offered low-cost air tickets on some routes that overlap with low-cost airlines three years ago. The premise of the low price is that passengers cannot change their tickets or choose seats in advance. Up to now, Delta has provided over 450 low-cost air tickets. Article.

American Airlines and United Airlines began last year to provide such cheap tickets without many additional services, thus competing with budget airlines for customers.

Far from it, at the end of December, the cheapest fare for leisure travel dropped by an average of 24% compared with the same period last year. The fares from Chicago, Philadelphia and Dallas dropped 54%, 48% and 40% respectively.

The three major airlines have previously been criticized by ZZ and consumer groups, accusing them of using the concentrated market power brought about by industry consolidation to maintain high fares.

Although it is true, it is market forces that triggered their adjustments this time, not the so-called entertainment criticism. In the face of the ‘US Knife’, what is criticism? Destructive power is not enough hurricane!

And for the three major airlines, even if there are sufficient business travelers to support their revenue, there are more customers who only fly once a year or even fewer, and this part of the group that is extremely price sensitive contributes nearly half of the Revenue, their existence and importance cannot be ignored.

In addition to lowering fares, the three major airlines also tacitly adopted the method of increasing seats to reduce costs.

However, additional seats have reduced a key indicator-unit revenue, which is the revenue earned by airlines flying one kilometer per passenger. Other airlines do not know that Delta Air Lines’ unit revenue in the fourth quarter will be 5 lower than a year ago. %-7%.

This has directly caused some investors to worry, even if Delta has announced record profits.

However, this hemorrhage has achieved a certain effect on the income of low-cost airlines. Looking at their stock prices, we know that Spirit Airlines, which is in the limelight, has been cut in half from 88 dollars at the beginning of the year to 37 dollars now. .

But it is a pity that the three major airlines themselves can't hold it anymore. Otherwise, to maintain this price war, the low-cost airlines may only have to bow their heads and call Dad this way.

But at the same time, San Dahang probably is not in the mood to recognize these godsons. After all, he can't live anymore. How can there be extra rations for outsiders?

After all, who wins and who loses in this battle?

Having said so much, just to prove one thing, Tyrell suggests to continue the price war, this method does not work!

In Yang Cheng's view, fighting this kind of thing, whether it is going to the battlefield with real swords and guns, or a commercial battle with no smoke on the surface, you must make full use of your own advantages if you want to win.

Regardless of the other two, what are the advantages of Delta Air Lines?

A lot of money!

It's a bit vulgar, but it's a fact. Delta Air Lines has the largest amount of funds in the world. In fact, can low-cost airlines compare?

In that case, why bother to play a wasteful price war and just buy directly?

Although Delta Air Lines has not interrupted its mergers and acquisitions with other airlines, it did not have a clear strategic plan.

A hammer in the east and a hammer in the west is a bit of a remedy, or pure interest.

Since low-cost airlines have brought a sense of crisis, why not take advantage of the capital and go all the way, buy all of them to become subsidiaries and sun companies, and leave the pressure on other rivals?

You must know that the tacit agreement between the three major airlines may be broken at any time, and unanimously becomes a chaotic battle with the outside world, which can add to the obstacles of the opponent Everyone does not mind doing it.

Not to mention the coexistence of princes in addition to the three major airlines. These companies, which are between major airlines and low-cost airlines, have never given up on catching up with leading companies.

Not just last month, Alaska Airlines, which has been competing with Delta Air Lines for the best airline in the United States, completed a $2.6 billion acquisition. The target was the famous Virgin America.

For this transaction, Alaska didn't talk about smashing the pot and selling iron, but at least it was bleeding heavily, not only owing a debt, but also draining the company's cash flow.

In Yang Cheng's view, this deal was a bit worthless. In the process of bidding with opponents, Alaska Airlines achieved a **** victory by over 80% premium.

However, after all, Alaska Airlines acquired Virgin America and surpassed JetBlue Airways to become the fifth largest airline in the United States in terms of capacity. It typically smashed its teeth and swallowed it, even if it was wearing a torn vest and rotten pants. The outside must also be a custom suit, at least it looks glamorous.

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