After all the hoopla is over and Richard Branson heads back to his private island, what will the real fallout be from Virgin America’s entrance into the U.S. market?
Reporters across the country have been pinging me for a few weeks asking a variety of questions about Virgin America. It started a couple of weeks ago with a radio interview with CBS Market Watch.
I’ve done my best to boil down the questions and give my take on the situation:
1) What will happen to transcontinental airfares from San Francisco?
It has already happened. United dropped its cheapest airfares between San Francisco and Washington D.C. by $200 roundtrip (the Chicago Tribune used our data to show this dramatic price drop) and has matched Virgin America to LAX, NYC, and Las Vegas.
2) Will it force the other airlines to upgrade their planes and offer mood lighting?
It’s doubtful. JetBlue started the trend, but when Song from Delta and Uniteds Ted tried to keep up, they hit the scene and only Ted remains on life-support. Looking at past failed attempts like these and considering the fact that American Airlines isn’t taking delivery of any new planes next year, my guess is that we’ll have to wait a while for lava lamps on the legacy airlines.
3) How Long will the airfares stay at these introductory prices?
United is the airline being threatened out of SFO by Virgin America, and they showed they’re ready to play hardball when they matched and undercut the ridiculously low prices of Independence Airlines and put the small carrier out of business. So I look for United to be very protective and aggressive, and I think we’ll see their fares go even lower.
United will give Sir Richard his day for a while and then look for a battle royale in the near future. After this posturing faze, which should last until Mid-spring of next year, I look for both United and Virgin America to raise their prices (remember those 90% load factors this summer) to something more fitting cram packed summer flights.
This same sort of thing happened in Dallas when Southwest was allowed to offer service outside of the surrounding states. The prices went really low for a while (for example $180 rt Dallas-Los Angeles, down from $300’s) and then began to rise a bit as tempers settled down.
The real test will be when Virgin America picks its next set of routes and the competition really heats up. The beloved blond one has been known to savor a fight or three.
I went on the Virgin American website to check fares from LA to NY and when I checked seating on a particular flight, I found a $50 premium charge for exit isle seats. That’s somewhat interesting in that a passenger, in the event of an emergency, commits to help the airline for which there should be some benefit. Oops, I guess the benefit is a lighter wallet and more leg room. Suffice to say, this is not an attractive policy.
[...] was an interesting week in the world of travel. Virgin America made it’s maiden voyage, New York passed a Passenger Bill of Rights, and more fall fare sales hit the market. There was [...]