Content provided in partnership with

Transportation Industry

UNITED RISES TO THE OCCASION Airline Clips E-Ticket Savings

World Airline News, Oct 9, 1998

In its effort to demonstrate that it is not undercutting its major competitor in Denver, United Airlines [UAL] has curtailed its cut-rate E-Fare program in markets where it competes with Frontier Airlines [FRNT]. As a result, consumers will miss out on at least $2.4 million in savings off United ticket prices this year, according to United's calculations.

E-Fares are the sharply-reduced fares offered on the Internet about three days prior to the flight. They are offered each week, but also change each week based on a market-by-market analysis of flights which still have open - and unlikely to be filled - seats.

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

United, which launched its E-Fare program in mid-January, estimates that roughly 500 consumers per month would have purchased E- Fare tickets for the 12 routes on which United competes with Frontier. Each of those customers - the majority of whom are leisure travelers looking for a last-minute weekend getaway - would have saved about $400 off the comparable three-day advance purchase fare, according to Bob Merz, United's director of domestic revenue management.

The math is fairly straightforward. In one market Merz analyzed in May, United missed out on about $2,856 in incremental revenues while passengers wound up paying an additional $8,664.

Frontier competes against 43 percent of the seats that United offers out of Denver. For the other 57 percent of its capacity, United sold 650 E-Fare tickets in May 1998. Had its self-imposed Frontier restriction not been in place, the carrier estimates it could have sold 1,140 E-Fare tickets. The highest estimated loss came from a market where United figured it could have sold 85 tickets while the least damage was done in a market where it would have sold about 19 E- Fare tickets in May.

Carrier officials estimate that their figures could be low since E-Fare ticket usage is growing rapidly. Over the first half of the year alone, United's E-Fare ticketing has increased by about 1,600 percent.

Evolution of E-Fares

United's E-Fares evolved from what it called the Denver Weekend Sale - a program similar to E-Fares that it offered in the Fall seasons of 1995 through 1997. No markets were excluded during the first two years, but following Frontier's complaint in 1997, United avoided all Frontier markets for its Fall 1997 Denver Weekend Sale.

United launched the E-Fare program on Jan. 21, 1998, partly as a competitive response to other airlines' Internet sales efforts. Initially, it was offered only in domestic markets, but United added E-Fares to Latin America on June 4, to trans-Pacific destinations on June 11 and to trans-Atlantic destinations on Aug. 29.

On the domestic front, United offered E-Fare tickets in Frontier markets only for the first nine weeks of the program. After March 18, the carrier consciously avoided Frontier markets, even though E-Fares had been offered in very few of the 12 overlapping routes. In the first five weeks of the program, the most United ever offered were E- Fares on three Frontier routes and, in another week, United offered none.

Its decision to indefinitely curtail E-Fares in all Frontier markets comes at a time of increased commotion in the industry about alleged predatory practices by the major carriers and the Department of Transportation's plans to establish competition guidelines, a preliminary version of which was released in April. In addition, a 1997 complaint against United by Frontier still is undergoing periodic review by the Department of Justice.

So far, Frontier is satisfied with United's efforts. Frontier CEO Sam Addoms said at the carrier's annual meeting Sept. 10 that he perceives the competitive environment now to be "highly competitive, but fair." Although not necessarily tied directly to United's actions, Frontier reported its first quarters of profitability since early 1996 during the first and second quarters of this year.

E-Fare Math

* United analyzed one market in which it competes head-to-head with Frontier. In that market, the 21-day off-peak fare was $397 round trip. A three-day advance purchase cost $480.

* The E-Fare price would have been about $119.

* United therefore lost about $119 in incremental revenues on each E-Fare ticket it might have sold.

* At the same time, lack of an E-Fare ticket cost the consumer $361, or the difference between the E-Fare price, which is offered beginning three days prior to the required departure date, and the actual cost of the three-day advance fare.

* In the market analyzed, United figured it could have sold 24 E-Fare tickets in a month saving passengers $8,664 and generating $2,856 in incremental revenues.

Transportation Industry

UNITED RISES TO THE OCCASION Airline Clips E-Ticket Savings

World Airline News, Oct 9, 1998

Find Research Guides for:

Find Featured Titles for: Sports

Most Popular Articles in Business

Most Popular Publications in Business