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Author Topic: Driving prices into the toilet  (Read 2405 times)

charger27

  • Former member
Driving prices into the toilet
« on: May 25, 2009, 04:37:22 PM »
Why?!
Why do some of you INSIST on hammering down lane rates to the point that nobody (including you) are making a dime on that leg... and in some cases taking a loss?

Hopefully you will go bankrupt soon, and quit polluting the game world.
It would be nice to have either a built in rate cap floor on routes, or a time limit for airlines to offer "seat sales".

I have the choice of either moving to another route, or leaving my planes where they are and grinding the intellectually challenged individuals into the ground... as the culprits are tiny outfits with little cashflow (big surprise).
I haven't decided which I will do yet.

Offline Sigma

  • Members
  • Posts: 1920
Re: Driving prices into the toilet
« Reply #1 on: May 25, 2009, 04:57:57 PM »
Why?

Because I've ran every single competitor out of DFW, and am aiming to run every competitor out of this part of the country (entire central portion of the US between ATL and LAX), by doing just that.

If they're new guys, yes, that's pretty dumb.  But for anyone with any sizeable number of routes who can sustain losses on singular routes what do you suppose they do -- ask you nicely to get off the route?

And the simple fact that you're at least considering moving your planes off the route means they must be having their intended effect.

bluemoon

  • Former member
Re: Driving prices into the toilet
« Reply #2 on: May 25, 2009, 05:42:29 PM »
Why?

Because my A300-600Rs can carry 50% more passengers than your B707-320s and only consume 50% of fuel you consumed.

charger27

  • Former member
Re: Driving prices into the toilet
« Reply #3 on: May 25, 2009, 05:46:22 PM »
Why?
Because I've ran every single competitor out of DFW, and am aiming to run every competitor out of this part of the country (entire central portion of the US between ATL and LAX), by doing just that.
If they're new guys, yes, that's pretty dumb.  But for anyone with any sizeable number of routes who can sustain losses on singular routes what do you suppose they do -- ask you nicely to get off the route?
And the simple fact that you're at least considering moving your planes off the route means they must be having their intended effect.
I think it is a 2 part problem.
1. the new guys that don't really know what they are doing.
2. guys like you that think they own routes.

In reality, there is no way that your own board of directors would allow you to fly at a loss.
A price war, seasonal package pricing, seat sales - are all short term situations.
I would like to see aws put in either a time limit on price gouging - or a cap that airlines would be unable to go below.
This is all the business side of the game that I'm sure will be addressed in time.

Now that you have broadcast your intention to "run people out" of airports and regions... I think you will have a fight shortly from an alliance or two... I have seen that happen before.
Here's hoping you take a beating.  8)



charger27

  • Former member
Re: Driving prices into the toilet
« Reply #4 on: May 25, 2009, 05:49:04 PM »
Why?
Because my A300-600Rs can carry 50% more passengers than your B707-320s and only consume 50% of fuel you consumed.
You're not the one I was referring to anyway... or the routes in question.
I am well aware that until I start to get some of my new aircraft delivered that maintenance and fuel have to be factored in to my revenues.

bluemoon

  • Former member
Re: Driving prices into the toilet
« Reply #5 on: May 25, 2009, 06:16:05 PM »

In reality, there is no way that your own board of directors would allow you to fly at a loss.
A price war, seasonal package pricing, seat sales - are all short term situations.
I would like to see aws put in either a time limit on price gouging - or a cap that airlines would be unable to go below.
This is all the business side of the game that I'm sure will be addressed in time.


Below is the definition of "Price War" at Wikipedia

Price war is a term used in business to indicate a state of intense competitive rivalry accompanied by a multi-lateral series of price reduction. One competitor will lower its price, then others will lower their prices to match. If one of them reduces their price again, a new round of reductions starts. In the short-term, price wars are good for consumers, who can take advantage of lower prices. Often they are not good for the companies involved. The lower prices reduce profit margins and can threaten their survival.

In the medium to long term, they can be good for the dominant firms in the industry. Typically, the smaller, more marginal, firms cannot compete and must close. The remaining firms absorb the market share of those that have closed. The real losers then, are the marginal firms and their investors. In the long term, the consumer may lose too. With fewer firms in the industry, prices tend to increase, sometimes higher than before the price war started.


If I am your competitor, I am targeting at long-term profits and I believe my board of directors will support my decision as the company will make more money when monopolizing the market.  Itís the business that happens everyday in your life.  Moreover, please STOP suggesting another CAP to help you competing with others.  Itís Unrealistic and Unfair.


pharmy

  • Former member
Re: Driving prices into the toilet
« Reply #6 on: May 25, 2009, 06:23:34 PM »
sometimes it only takes 80% pricing, sometimes it takes 10USD a ticket, but yeah running people of routes is definately worth it. Just make sure your image is high and run some advertising on the route. I actually sneak in one 737 at 90% first, build up route image and then I plan to make it unprofitable for everyone. With more then 200 planes (150 running at 90%+ LF) I can afford to do so. I ran DXB-JNB at 10 dollar for six months, now instead of 200% overcapacity, I have 98%LF with less then capacity on the route. I do stay off the big boys at BKK, SIN, HKG because they probably have deeper wallets and a higher image, but other then that I can afford to compete on any route.

Offline Sigma

  • Members
  • Posts: 1920
Re: Driving prices into the toilet
« Reply #7 on: May 25, 2009, 06:34:46 PM »
I think it is a 2 part problem.
1. the new guys that don't really know what they are doing.
2. guys like you that think they own routes.

In reality, there is no way that your own board of directors would allow you to fly at a loss.
A price war, seasonal package pricing, seat sales - are all short term situations.
I would like to see aws put in either a time limit on price gouging - or a cap that airlines would be unable to go below.
This is all the business side of the game that I'm sure will be addressed in time.

Now that you have broadcast your intention to "run people out" of airports and regions... I think you will have a fight shortly from an alliance or two... I have seen that happen before.
Here's hoping you take a beating.  8)


I agree that it's not realistic.  But it has nothing to do with the Board (who would have ZERO problems flying at a loss on singular routes, as long as the overall company made money), it has to do with federal laws.  You can't dump capacity on routes to drive a competitor out and then yank all the flights and drive prices back up when they're gone.  That's a federal crime in most industrialized nations.  But, just as in real-life, good luck proving what is "dumping" and what isn't.  You don't know my costs, so you can't decide what's a "fair" price and what isn't.  It also wouldn't fly in real life due to organized labor that would prevent the immediate creation and dissolution of capacity.

But there's nothing particularly "fun" about "realism".

If all you want to do is go after routes that no one's on, don't want anyone to go after your routes, and only charge prices comparable to your own, then you might as well play this game with some string, some thumbtacks, and a map of the world.  Because without competition there's really no point.  You can do whatever you want without competition and make money hand over fist.

Besides, my losses on flights have never been more than a completely sustainable few grand a week.  I think my biggest loss ever was $22,000/week on a route, and that was charging maybe 25% of the default rate.  It's not my fault that my operation is so efficient I can turn a profit even well below 50% of default rates while my competition can't even come close.  I run a lost-cost carrier, and it's done me exceptionally well, i'm one of the largest carriers in the game despite the fact that I charge, by far, the lowest average ticket prices of any major carrier.  I'm turning record profits in a year where fuel prices went up 300%.

It's called playing the game.  I managed to out-maneuver the competition.  I can charge signficantly lower prices and still turn a profit, or at least a MUCH smaller loss than they can trying to match me. I don't care if they try to beat me on pricing.  In fact I hope they do.  Because it means they're losing more money than me and I know I can sustain it longer (If I couldn't, I wouldn't have tried).

I'm sure my competition thought they didn't have anything to worry about at first -- all I was doing was flying meager 600NM range planes in the area around DFW.  They didn't realize I was quietly swooping up all the slots with my regional jets until they were all gone.  They were stifled for slots, and their biggest problem was they had crappy commonality from relying on the Used market to supply whatever they could take.  They didn't realize I had depended on the F28 because I planned on the next model of my plane to come out with double the range and 100% of the commonality.  Suddenly my range doubled without any increase in maintenance costs for a new plane-type, and it was one of the most fuel/labor-efficient planes you could buy.  As demand on my lines grew (lower prices help demand grow faster) and I needed more capacity to keep from runnign 10 flights to the same place (not possible due to slots)  I turned to the A300 -- an unpopular plane that let me get a large fleet without waiting -- my range again doubled -- and with stopovers on the coasts I could reach destinations in Asia and Europe.  I became an international airline with a meager 2 plane-types that also happened to be extremely fuel and labor efficient.  I was perfectly positioned to run my competition out as fuel prices went up -- and that's precisely what I did.  My airline never operated at a loss, not even remotely close to one, but my competition was hemorrhaging cash as fuel prices climbed and/or they let their commonality get out of hand.

They were dropping like flies, I was posting record profits.  Hm.  What's the problem there?  I guarantee you my "Board" wouldn't have one iota of a problem with that situation.

There's also the dumping that goes on as a result of simple game mechanics.  Since we can't originate flights from anywhere other than our home airports, dumping results from people moving planes to other "hubs".  I've got places where I'm flying at 600%+ capacity, not because I want to, but because I have to.
« Last Edit: May 25, 2009, 06:40:39 PM by Sigma »

pharmy

  • Former member
Re: Driving prices into the toilet
« Reply #8 on: May 25, 2009, 06:56:48 PM »
charger's average age is 23.36 years.

Kontio

  • Former member
Re: Driving prices into the toilet
« Reply #9 on: May 25, 2009, 06:59:04 PM »
Competition is what makes this game fun. Please do not introduce artificial price limits.

Quote from: charger27
I have the choice of either moving to another route, or leaving my planes where they are and grinding the intellectually challenged individuals into the ground... as the culprits are tiny outfits with little cashflow (big surprise).

What is the problem with those choices?
« Last Edit: May 25, 2009, 07:02:34 PM by Kontio »

Offline Sigma

  • Members
  • Posts: 1920
Re: Driving prices into the toilet
« Reply #10 on: May 25, 2009, 06:59:58 PM »
His average plane is 24 years old?

Holy crap.  I didn't think you could even buy them that old.

My average is 1/10th that -- at 2.5 years.  And that's with a fleet of ~150 planes.

pharmy

  • Former member
Re: Driving prices into the toilet
« Reply #11 on: May 25, 2009, 07:11:17 PM »
yeah I have 219 planes at 2.07 average age, damn I could run this guy off any route with 80% prices at my current 90% image

charger27

  • Former member
Re: Driving prices into the toilet
« Reply #12 on: May 25, 2009, 07:14:43 PM »
charger's average age is 23.36 years.
What about my 40 new planes on order?
Know the whole story before you beak off.

Offline Sigma

  • Members
  • Posts: 1920
Re: Driving prices into the toilet
« Reply #13 on: May 25, 2009, 07:22:09 PM »
What about my 40 new planes on order?
Know the whole story before you beak off.


You don't pay Maintenance and Customers don't fly on planes you have "on order".

So what and how many you have on order is completely irrelevant.  

It's clear when you have planes like that why you lament people stealing your traffic.  With planes like that, someone could come in with prices with a healthy margin on them and still steal your traffic away.  You assume they must be taking a loss, but it's very possible, even likely, that you're losing traffic even when they're still making decent money.  They're going to have lower maintenance costs (assuming commonality at least equal to yours), more attractive planes, and could very likely have a significantly higher CI (which makes all the difference).

charger27

  • Former member
Re: Driving prices into the toilet
« Reply #14 on: May 25, 2009, 07:29:05 PM »
yeah I have 219 planes at 2.07 average age, damn I could run this guy off any route with 80% prices at my current 90% image
Yep - reading your posts in the various forums... you are truly the airline hero... the man.
This started out about a couple little 2 and 3 plane airlines that were doing silly things with prices.

I will say as I have before - I could care less about the huge airlines, and competing with them - this is strictly a hobby for me - not a full time job.
There is a reason I only ordered 40 planes... I DO NOT WANT TO FLY ANY MORE THAN THAT!

If you are trying to be the biggest airline... good for you!
I will leave that to the other fanatics to challenge you for the ultimate tycoon crown.
« Last Edit: May 25, 2009, 07:39:15 PM by charger27 »

pharmy

  • Former member
Re: Driving prices into the toilet
« Reply #15 on: May 25, 2009, 07:37:34 PM »
This was exactly a month ago

Quote from: pharmy on April 27, 2009, 10:06:41 PM
I'm done waiting, in March I receive the first two MD90s, and after that continously 25 more (at about 2-3 per month) 7 MD11s are in between, and after that starting November 97, I start having the first of my 17 737-700s arriving. Just have to keep on ordering, no time to save up and buy any a/c.

charger27:

Where the h*** are you getting the money this early on for those kind of orders?

I actually got this money from the 21 a/c (including 747-200, and Tristars) that I picked up in the begining. I am a pretty busy guy (30 years old and working 15 hour days) , but I do have about 3 hours access to the game a day at night (blame insomnia). I simply chose to wait for new planes, while others went ahead with buying old pieces of junk. That means that until recently, I had to play this game an hour a day. Not that difficult. I am gonna quit jet age two from no. 1 position, cause I have no time.

charger27

  • Former member
Re: Driving prices into the toilet
« Reply #16 on: May 25, 2009, 08:01:51 PM »
His average plane is 24 years old?
Holy crap.  I didn't think you could even buy them that old.
My average is 1/10th that -- at 2.5 years.  And that's with a fleet of ~150 planes.
Laugh if you want... those old pelter 707's have been good to me!
Would I have liked to have switched them out by now? Of course, but what do you do with waiting lists.
They were available when nothing else was... and they have paid for their replacements and much more.

Again I mention... you are obviously playing on a more serious level - good for you, hope it works out for you.
From previous... if I were an alliance that wanted to challenge your takeover bids on airports, lanes or regions - I wouldn't do it on routes you have already undercut... I'd hit you on the routes that are paying your bills.  ;)

Offline Sigma

  • Members
  • Posts: 1920
Re: Driving prices into the toilet
« Reply #17 on: May 25, 2009, 08:13:28 PM »
Laugh if you want... those old pelter 707's have been good to me!
Would I have liked to have switched them out by now? Of course, but what do you do with waiting lists.
They were available when nothing else was... and they have paid for their replacements and much more.

Not really laughing...  okay, maybe a little ;), just trying to help you out.

Quote
Again I mention... you are obviously playing on a more serious level - good for you, hope it works out for you.

I suppose I am.  But it's not like it takes much time with this game.  An hour or so at night after the wife goes to bed is about all I put in (advance scheduling of planes is a great feature as there's no need to log on in the morning to schedule planes now).  I most certainly don't micro-manage my routes (I have lots of routes I'm over capacity on due to changing from smaller to larger planes and am too lazy to take the little ones off), and the best thing about having only 2 types of planes is what, when I want to upgrade them, I don't have to re-do the whole route when I replace the plane, I just do the "Move Route" button.

And I'm not out to be #1 either.  I leave that to the likes of Magic Carpet and Royal Chang.  I started the game with a goal of being the only carrier at DFW -- I did that.  Then I broadened it to the only carrier HQd in the Central US, which will probably take the remainder of the game.  My next game I think I'll try in Africa -- clearly won't get to #1 in the world from there, but I can shoot for #1 in Africa.  Will be a fun challenge.

Quote
From previous... if I were an alliance that wanted to challenge your takeover bids on airports, lanes or regions - I wouldn't do it on routes you have already undercut... I'd hit you on the routes that are paying your bills.  ;)


And that's how you should do it.  Thankfully though, as I control virtually every slot into my airport (and my Alliance members control most of the others), I'm kind of sheltered for the most part.

charger27

  • Former member
Re: Driving prices into the toilet
« Reply #18 on: May 25, 2009, 08:35:27 PM »
Not really laughing...  okay, maybe a little ;), just trying to help you out.
I suppose I am.  But it's not like it takes much time with this game.  An hour or so at night after the wife goes to bed is about all I put in (advance scheduling of planes is a great feature as there's no need to log on in the morning to schedule planes now).  I most certainly don't micro-manage my routes (I have lots of routes I'm over capacity on due to changing from smaller to larger planes and am too lazy to take the little ones off), and the best thing about having only 2 types of planes is what, when I want to upgrade them, I don't have to re-do the whole route when I replace the plane, I just do the "Move Route" button.
And I'm not out to be #1 either.  I leave that to the likes of Magic Carpet and Royal Chang.  I started the game with a goal of being the only carrier at DFW -- I did that.  Then I broadened it to the only carrier HQd in the Central US, which will probably take the remainder of the game.  My next game I think I'll try in Africa -- clearly won't get to #1 in the world from there, but I can shoot for #1 in Africa.  Will be a fun challenge.
And that's how you should do it.  Thankfully though, as I control virtually every slot into my airport (and my Alliance members control most of the others), I'm kind of sheltered for the most part.
Yep that advance route planning feature was a great addition... and certainly helps those of us that can't just be on the spot when was needed in the past.
At the end of it all, I do admire your style of play - and if no one is going to counter the domination... hey, game on!
It seems that most alliances haven't figured out the benefits of playing as a team in those situations.

NicholasB

  • Former member
Re: Driving prices into the toilet
« Reply #19 on: May 26, 2009, 06:20:32 AM »
Hi,

I try to if i can, not engage in price wars. I am happy to compete on routes with other airlines even if it is a conjested market, I will discount my prices to what i think is reasonable and competative. I wont try to force an operator out of business, i just hope to find some kind of harmony on the route so that all the airlines have a chance to make money and me too. Ill even try to avoid a route altogether if i can see that capacity is simply over the top. I think that if airlines are competing with about 20% over capacity on a route it is fair and reasonable and realistic. Fortunately for me, in my neck of the woods the competition seems to be taking the same approach and there seems to be a sense of balance and tolerance amongst each other. I dont think any of us want to get into warfare among each other. there is more money to be made in optimizing your fleet and other factors.

Another point, alot of big operators are now dumping their old planes on the used markets, they wanna get out of paying for their d-checks. Id suggest you dont buy or lease any of these aircraft, let them deal with the cost, which may have an effect on their pricing. when they start losing money due to huge maitainance bills they wont be able to sustain their price wars. if they cant sell of this planes the problem will compound further for them. I have seen several aircraft way over priced with their d-checks due within less than 12 months. Dont buy or lease these ever. if you do lease them you are just helping him and your being foolish yourself and just allowing him to continue his price war.

lease a new plane, you can get ATR props within a couple of months at the moment, and on the right routes these birds are little gems. I am planning not to convert leases to ownership untill very late in the game, i want to avoid for paying for any D-checks and will do so by buying them when the timing is right and the d cheks will expire after the game has ended.

Good luck to youall,

NicholasB

 

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