Another airline price war erupts...will the results be any different?

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Just when you thought that the airline industry had finally learned its lesson, it was announced late month that a price war erupted down in New Zealand with airlines offering cut-rate flights priced less than the standard cab fare it took to get you to the airport in the first place.

According to the country’s largest newspaper, The New Zealand Herald, both Jetstar and Emirates Airlines have been slashing fares on the Auckland to Sydney (Australia) route with some flights priced as low as $89 one-way. Additionally, Pacific Blue airlines began advertising bargain fares to some of the nearby Pacific Islands--a popular holiday destination for many New Zealanders.

Travel industry experts said yesterday airlines were trying to encourage bookings to fill flights during quiet periods.

Some said sales had been picking up as New Zealanders recovered from the recession, and discounts were a good way to get those who had not travelled during the economic crisis to plan a trip.

I’ve said it before and I’ll say it again here; Price wars are a fool’s game. No matter what the original rationale may be and no matter how different the circumstances may appear to be this time around, price wars are un-winnable.

During the heated airline price wars that began in the late 1980s and extended into the mid-90s, airline loses were estimated to exceed $10 Billion with tens of thousands of jobs lost. Carriers large and small--including Continental, TWA, and America West--filed for bankruptcy protection. And the industry saw historic names such as Pan AM and Eastern Airlines end up being liquidated for good.

Much has been written about how to survive price wars, and I’ll add my two cents here. The best way to survive is to avoid them at all cost. Don’t fall prey to convention wisdom that it’s easy to extract yourself from a war after either initiating or responding; it’s not. It’s easy to lower prices, much tougher to raise them back to pre-existing levels. Don’t fall for the bait.

Here’s the takeaway: Price wars are a fool’s game...‘nuff said!