American Airlines Inc. (NASDAQ: AAL) has cut fares to all 50 states as part of a promotion that presumably will add to its summer traffic. The puzzle is why the carrier’s management would make the offer.
The new promotion, called “Go see the USA,” targets summer travelers. Part of the enticement is a $100 discount on tickets booked between now and the end of the month (April 30). The promotion also includes discounts for hotels and makes the case that travel days between Monday and Thursday usually mean lower ticket prices. The ticket price pitch is based on something any regular or smart flier knows.
The airlines are in the best position to make profits in years. After decades of bankruptcies and low profits, mergers that have taken duplicate routes out of commission and lowered personnel costs recently were married to low fuel costs. Based on carrier data, many flights are filled to capacity or even beyond it. Maybe American fights are less than full over the next few months.
The most successful carriers, many industry experts would say, are those that have the most loyal customers, those who come back to the same airline again and again. It may be that the American promotion is meant to draw in customers who want to go on vacation. Summer vacations are followed by Thanksgiving and Christmas. One or two good experiences probably yield passengers more likely to return. Since services have been cut by most airlines or carry a charge, that unpleasant part of flying has been spread across the entire industry.
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Airline ticket discount programs share a great deal in common with new car discounts, special and low-priced fast-food menus, and the retail sales found in many stores. A new customer turned into a repeat one brings more revenue and presumably more profit. The danger is that, if that experience is bad, customers may not return at all. American Airlines needs to make sure the 50-state promotion is not one that fliers regret.
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