One Mile at a Time notes that American Airlines is running $16 one-way fares between Los Angeles and Miami next month. Just what is AA trying to accomplish?
I questioned the idea of quarantining early-on, but have largely signed on as COVID-19 continues to proliferate in the USA. The virus easily spreads from person-to-person and the best way to avoid it is to stay home and distance yourself from others.
As difficult as it has been, I’ve stayed away from parents and elderly uncle for two weeks. I’m no longer meeting with friends in-person. And I’ve suspended all travel.
Most airlines have maintained “regular” pricing, using the logic that people are only going to fly if they really need to, so why discount the fares. I think this makes perfect sense, since we don’t want mileage runners and bloggers flying for the sake of flying during this critical time of containment.
But American Airlines is making that quite difficult with transcontinental fares between Miami and Los Angeles running only $16 each-way for the entire month of April.
As an Executive Platinum on American Airlines, it is hard not to look at these $16 fares (or $48 regular economy fares that will come with free upgrades) and want to jump on a plane. If One Mile at a Time was accepting visitors, it would be a perfect time for a visit.
Well, I’m staying home…I’m not going be “that guy” who flies for a non-critical purpose and risks contracting or spreading the virus to others who may be more vulnerable.
But I am curious what American Airlines is trying to accomplish with these cheap fares.
I do have a theory.
Perhaps AA is just testing the waters for demand. Will it sell a whole lot of tickets, even now, if the price is cheap enough? Is this a way to test how AA will manage fares on a more widespread basis?
I hope AA isn’t doing this for publicity, because the last thing Miami or Los Angeles needs right now is tourists. There’s really no need to fill up planes with $16 fares during this time.
What are your thoughts on the reason behind these super-cheap fares on American Airlines?
I believe the true reason behind it is cash flow. AA is in the blink of bankruptcy and among the major US Airlines, they are the weakest financially speaking. Therefore, my theory they are trying to bring cash in to maintain their financial health even if it is with a $16 OW fares. There are already not refunding the money for the tickets for the flights that have been canceled.
Stay at home and abide by the president’s rules please, to save others lives at risk. There must be something missing in your life, that you would consider taking a flight just because its cheap. Look within and try to improve yourself or figure out what’s missing in your life while sheltered at home. Im an executive platinum and have zero desire to requalify during these terrible times or expose others.
From the post: “Well, I’m staying home…I’m not going be “that guy” who flies for a non-critical purpose and risks contracting or spreading the virus to others who may be more vulnerable.”
The low fares have nothing to do with testing demand. The rationale is most likely due to collecting some revenues while keeping fleets and pilots at minimum flying requirements in preparation for the inevitable start up when the virus passes.
Airplanes must be used on a regular basis to keep them in flying proper condition. You cannot park a plane for two months and simply turn it on and start flying the plane. The cost of properly parking a plane for a couple months and the cost of bringing the plane out of parking is high. There are a lot of costs the the average person is not aware of.
Similarly, pilots must fly a minimum number of hours to stay current. If they do not meet these minimum requirements, they must go back through training (simulators) in order to fly again. Considering there are thousands of pilots and only a few simulators, it would take months, if not years to get pilots certified to fly again if they completely park all aircraft for a couple months.
Your second and third points are certainly valid. Not sure about your first one — even at $20/barrel fuel, is it worth it to collect $16/passenger?
Perhaps they were going to operate the flight for cargo anyways, and now want to collect *something* for a passenger?
I’m going to go accounting geek on you, so I apologize in advance…
In cost accounting there is a concept of selling by-products in a high fixed cost environment, where your manufacturing process produces some sort of waste that is useful to others. You don’t need it, and don’t customarily sell it, so you sell it to others for a few pennies. On an absolute basis, if you allocated your production costs to your by-product, it would lose money. But your production costs are the same with or without the waste product, and so you might as well get *something* for it rather than nothing, since it’s basically free money to your bottom line.
If AA is running these planes for cargo, to avoid pilots losing certification, or to avoid parking and re-activation costs as the two other commenters posit – all very logical explanations – then the passengers essentially become by-products, because AA is going to run them regardless of loads. Someone must have done the math that if we’re going to have to run these planes and incur the costs, then any marginal revenue is better than zero.
I think the key is your last sentence, “…any marginal revenue is better than zero.”
My question is still whether a passenger, broken down on an individual basis based upon weight, burns more than $16 of fuel on a 5-hour flight. If so, doesn’t that hurt revenue, which would be higher with just the pilots staying current and the cargo in the belly?
That’s a valid question but I have to assume somebody did the math and determined the added fuel needed for a few extra passengers (I really don’t think these fares will stimulate demand more than a few percentage points) isn’t going to exceed what they gross in fares. Of course, if I’m wrong and these fares juice loads from 20% to 40% instead of 24%, they have a problem.
$16 fares will do wonders to boost the spending requirement for elites, lol
Indeed, these are certainly not status runs!
Not something I have interest in doing, but let’s say I’ve already met the spend requirement for EXP, but don’t yet have the required EQPs. Perhaps I could be tempted to qualify via segments at this pricing level.
Haha im doing eqds only for status this year. Would have to do 1000 of these to get platinum lol. Not just la to Miami. Ord to lax $38 return out to july.
It’s nice to see, during the coronavirus crisis, that we’re finally seeing prices as low as Europe. Unfortunately, it’s unsafe to fly now.
In contrast, I think United fares has gone up. United was running $99 BE o/w fares between Newark and Los Angeles in March with three day advance purchase. Now those flights are $173, or $161 with one-week advance purchase.
@ James – How is it unsafe to fly now? I’ve not seen a sudden increase in deadly crashes. I had to pick up a few things at Target this morning and I’m sure that airports and airplanes are cleaner and less crowded than Target or Walgreens or most grocery stores. The social pressure to lock oneself up at home is complete BS. Increases in depression, suicide, child and domestic abuse, and alcoholism are the unfortunate result.
Matthew, question for you and the other readers with law degrees: If AA files bankruptcy would points holders become another group of unsecured creditors, or do they have standing above others, say bond holders?
It may be AA is thinking of filing at some point to be able to renegotiate the labor contracts they just signed.
Mike, I don’t think points holders would stand above other creditors. But if history is any guide, we would get to hold onto our points.
May be just trying to build a case to show the government that despite low fares they were not able to get people flying thus would need more funding and incentives in order to stay afloat.
Bingo.
Would be great for those who have already recovered from COVID. They are immune, at least for the current strain, and since they can’t catch it they can’t spread it either.