Resisting the urge to match

Hawaiian Airlines says experiments with its long-haul fares helped boost revenues enough to push its profits up. hawaiian_n592ha_b_by_drewski2112.jpgPresident and chief executive Mark Dunkerley told investors, “We would try things week to week and see how it worked, then make a judgment to see if we should continue the experiment.” The experiment that worked, he said, was to “sell inventory closer in to the date of travel, at higher fares. And we exceeded our expectations”. Rivals had offered “irrationally” low fares, lower than in summer of 2006, on routes between the mainland and the islands, he said.

Airlines traditionally just go ahead and match a rival’s fare cuts, fearing that if their prices are higher, Mark_Dunkerley.jpg no one will fly them. Even with modern yield-management tools and their sophisticated power to predict demand and so help manage supply, the urge to match is deeply ingrained in airline management. But this summer’s yield-management achievement “will be harder to do in the weaker demand” of the winter season coming up, Dunkerley said in reporting third-quarter profits that were 152% higher than in the 2006 quarter.

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