In a continuing series, TruPrice is analyzing the fee structures of Southwest Airlines and Delta Air Lines. Today’s segment looks at the whole of Southwest’s and Delta’s fees structures and draws a conclusion that should surprise no one. And, we offer some parting thoughts that may cast the current outcome of the Clash of the Titans into a bit of doubt….
Since the merger announcement that Southwest Airlines would be gaining a foothold in Atlanta by acquiring AirTran and its ATL gates (and other operational components), TruPrice has been conducting a side-by-side comparison of the two companies’ fee structures. Without question, when taken side-by-side, we opined very soon after the merger announcement that Delta’s fees put DAL at a very competitive disadvantage when compared with SWA’s. And indeed, TruPrice fee information confirmed that in many categories, Delta not only is higher, but substantially higher.
Overall, Southwest crushes Delta in this first Clash of the Titans.
But, will this change? Across the spectrum, many Southwest fees are less than half of Delta’s and in some areas less than a quarter. But can the two airlines sustain this disparity? And is it competitive for both to continue their current fee structures? Can Delta continue to charge first and second baggage fees while Southwest charges zero? And can Southwest leave that revenue on the table? Can Southwest continue a single class of service (I predict absolutely not) and if not, will their costs rise driving a re-evaluation of their fees? Will the addition of a new fleet type drive up training costs for pilots or will they be satisfied with a single rate of pay regardless of aircraft type? Will Southwest add in-flight amenities like meals and entertainment to be competitive with Delta – again driving up costs?
And how will Delta respond? Anyone who thinks Delta didn’t learn from ValuJet/AirTran growing up in its backyard didn’t watch what Delta did to jetBlue when the folks in NY decided to introduce its unique brand of single-class service in Atlanta. And are these same people aware that Delta merged with what is considered the most aggressive airline in the US market at defending its turf: Northwest. Rest assured, there is no one in an executive position at Delta who isn’t going to defend ATL like a raging pit bull. And Doug Parker, US Airways’ leader who spearheaded the ill-fated hostile takeover attempt of Delta in the winter of 2006, found out first-hand what Delta people are capable of when they feel threatened.
TruPrice’s opinion: while Delta’s fees, as of this writing, would suggest that it is vulnerable vs. a lean and mean Southwest, we are going to see changes from both SWA and DAL as they size each other up and punch and counter-punch. In order to compete with Delta, Southwest will need to add products and services that will cause a re-evaluation of its fee structure and Delta will need to adjust its fees to become more in-line with Southwest’s.
I predict that we’ll be back again soon enough hosting another Clash of the Titans once the gloves really come off and the true competition begins.
Until then, enjoy the battle.