The airline industry is an extremely competitive business. In addition to this heavy competition, they face a unique situation as once a flight leaves with an empty seat, the opportunity to recover that lost income is gone forever.
At present there are four major airlines in the U.S. domestic market: American, Delta, United, and Southwest Airlines. All are fighting for a huge domestic market. At times, the ladies and gents sitting in the revenue management divisions of these monsters decide to tweak their fares in order to one-up the competition.
Let’s start with an example in the lucrative Hawaii market:
Delta Airlines has hubs in Atlanta, Salt Lake City, Cincinnati, and New York City. American has hubs in Dallas and Chicago. Delta may decide to go after American at one of American’s hubs by offering an extremely low fare ($200 round trip) from Dallas to Honolulu on Delta Airlines. Why would they do that? Maybe American has opened up a new route in another strong Delta market in the Southeast and is stealing what Delta once thought was their captive audience. Delta has decided to get even with American, even if it costs them money at their small operation in Dallas.
In many instances, American will retaliate by offering a low fare to Honolulu from a Delta hub like Atlanta. The war has begun. Other airlines may join in the fracas, and we, the consumers are the big winners.
This madness can go on for days or sometimes just hours, until the revenue management teams realize they are just hurting themselves. At times, I think they are acting like little children, and in this instance I like little kids.
In recent years Katy and I have come to love going to Hawaii; mostly because of the destination but partly because it is a frequent target for fare wars. Here are a few examples of prices we’ve paid:
- $200 including taxes, round trip from Newark
- $152 and $282, including taxes, round trip from Atlanta
- $141 including taxes, round trip
These trips were from hubs Newark (Continental — now United), Atlanta (Delta), and San Francisco (United). We flew United from Newark, United from Atlanta and the old Northwest Airlines from San Francisco, all because of these fare wars. These prices represent savings of 50% to 75% off typical airfares.
Ticket prices increase all the time. In 2012, the typical airfare from the east coast to Hawaii was $800 to $1000 while Fare War prices were from $400 to $600 — still a significant savings. Today we still see similar prices.
How do you find these fares and what do you do when you do find one?
Online websites offer you the opportunity to set up and sign up to receive fare alerts for certain destinations when prices make dramatic drops. Some of these sites are Airfarewatchdog, Travelocity, Orbitz, Expedia, Smartertravel, and don’t forget the airline website alert systems as well. Set the alerts from all the major airline hubs to Honolulu, as this is the most prevalent city for fare wars. In addition, many of the travel blogs online will give you a heads up when a fare war is going on.
So you don’t live in an airline hub city? That’s easy. You can use one of those free frequent flyer tickets you’ve accumulated to get to the city of origin of the fare war. Fly free to the cheap fare and you still have a cheap fare to Hawaii. I always keep a supply of airline miles from more than one airline available to fly me to the “fare war” city.
When do you book your fare war ticket?
That depends on you. When you first see the fare war, the questions to answer are:
- Is the city of origin located nearby or in a city you can get to by car, train or frequent flyer ticket at a reasonable cost?
- Is it on an airline you want to fly?
- Or, do you want to wait to see if the fare war spreads to your favorite airline?
Waiting may cost you, or it might make your trip more convenient and even more beneficial if it is on your favorite airline. Remember that tickets you buy during fare wars earn frequent flyer miles. It is about 10,000 miles round trip from the east coast to Hawaii, and that addition to your favorite frequent flyer account can be significant.
My position has always been when it makes sense, act quickly. Nothing feels worse than missing a fare war because I was looking for a little more convenient itinerary on my favorite airline. Remember, you are going to Hawaii for around $400.
I’m using Hawaii as an example because it seems to happen so often in this market. But there are other instances of fare wars. One mover and shaker in the industry is the low-cost carrier Southwest Airlines. When Southwest enters a new market they often drop fares to unrealistic prices to gain market share. The competitors will match those fares in most instances and retaliate by lowering a fare or two in another Southwest market. It is not just Southwest, but the “Southwest Effect” is legendary in airline pricing. Any airline that offers a fare that is ultimately unsustainable in a given market is enticing a fare war.
Be ready to act quickly and save vastly on a dream vacation destination!