Price discipline in the airline industry? It’s finally here
This is what price discipline is supposed to look like.
Last weekend, United Airlines increased most of its domestic fares by up to $10 per round-trip – a relatively insignificant amount given where fares stand today. What is significant, however, was that several of United’s main rivals including Delta, American, US Airways and Southwest all followed with higher prices of their own – virtually assuring that United's price hike would stick.
In the past, price hikes like those initiated by United would have been probably met by competitors doing nothing – leaving United as the higher priced carrier and making their price hike quite costly (no pun intended) for them only. The fact that the competition immediately followed their lead this past weekend vastly reduced the risk of that United's fare hike would be unsustainable.
Here’s the takeaway: In an industry where the lack of price discipline has resulted in billions of dollars of losses (and countless bankruptcies) over the past two decades, it’s nice to see the domestic airline industry finally getting its act together.