Support your answer with evidence from the story and from outside research if ne

Question

Support your answer with evidence from the story and from outside research if necessary.

Do you agree with the OP about the intent of the vignette? Why or why not?

Did they provide a complete and thorough analysis?

If they didn't provide a complete analysis, what could they have done better?

What did they do particularly well

Did they support their analysis with facts?

In January 2005, facing increasing competition from low-fare carriers, Delta Airlines introduced a new pricing plan called simplifares that dramatically cut ticket prices across most of Delta’s domestic US routes. Paul Matsen, Delta’s chief marketing officer, stated, “We could sit back and wait for low-fare competition to force us to react, but we’re going on the offense.”1 The company cut ticket prices by as much as 50 percent and eliminated the Saturday-night stay requirement that had long helped airlines distinguish between leisure travelers and business travelers. Furthermore, it capped the price for a last-minute coach fare at $499 and a first-class fare to anywhere in the country at $599. Although the new pricing scheme would immediately create a drag on revenue, Delta expected that over the long run the pricing move would be good for the airline by helping it take back passenger volume from the low-fare carriers. Business travelers, in particular, had been increasingly moving to low-fare carriers for their travel. In fact, near Cincinnati, where simplifares was first piloted, many business travelers preferred to drive to a smaller airport and pay the fares of AirTran or ATA rather than the higher fares of Delta. The new pricing structure was expected to bring these customers back to Delta.

Although Delta hoped for a new source of advantage from this pricing move, Delta’s main competitors—the full-fare carriers such as American and United—responded to simplifares by immediately matching Delta’s prices. Within days, business fares in the top 40 routes flown by major airlines were down by an average of one-third, and American Airlines’ fares were down by 44 percent.2 Perhaps as a way to slow the free fall, Northwest airlines warned the industry that “fare simplifications” would immediately and adversely affect industry revenues, but other airlines ignored the warning.3

By July, just six months later, Delta was already making upward price adjustments, citing a spike in the cost of fuel.4 The company abandoned the $499 cap and raised the ceiling by $100. Again, major carriers immediately followed suit. On the day of the announcement, a spokesman for Continental stated, “All I can tell you is that we did match Delta’s fare, and the match was effective today. Whatever Delta did, we did.”5 Meanwhile, the low-fare carriers welcomed the move as evidence that full-fare carriers were burdened with cost structures that were simply too high to match their low ticket prices.

Despite the effort exerted to implement the new pricing strategy, by 2008, Delta had completely abandoned the simplifares initiative. Richard Anderson, Delta’s CEO, seemed to suggest that efforts to compete on price with the low-fare carriers had been misguided. Cutting prices for business travelers had disastrous effects on revenue because the expected growth in passenger volume never materialized. This was largely because of competitive price matching. In a clear return to its previous strategy, Mr. Anderson stated, “You really have to have a differential [between business and leisure travel]. We offer different products to different customers based on their attributes. That’s better for an international carrier offering . . . different products on the same airplane.”6

Explanation / Answer

United Airlines as well as delta Airlines mostly operating in the local region with the domestic low fare airplanes. This specific incident help delta airlines and United Airlines to maintain their profits and to remain competitive in the specific environment. Delta Airlines bought a part of Pan Am Airlines at very low prices as an airline was declared Bank. Best health Delta Airlines to grow a benefits to the maximum level and to increase the overall level of prophets. United Airlines bought the Caribbean part of Pan Am Airlines which was proven to be very beneficial as Pan Am Airlines directly se East chernobyl disaster as their major drawback and overall level of tourist and Traveller reduced by a large margin.

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