Airline Mogul Forum
Airline Mogul => General Chat => Topic started by: brotonee on January 23, 2008, 11:43:05 pm
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I'm sure we've all been victim to this at one time or another (or, indeed, been behind the tactic at one time or another). My time for this has come - a large number of the routes I fly (mostly the ones leaving Wellington, but also a couple from Auckland) are under attack from the flooding tactic.
When I say flooding tactic, I am describing the highly competitive move where an airline will flood the market with high frequency, low cost fares. As an example, one of my competitors flooded a route with 20 or so flights priced at around 20 or so Euros, when most of the competitors prices were around the 70-100 Euro mark. Naturally, our loadfactors dropped like a stone and I found that I began to lose money on this route (and others where the same tactic had been employed), due to 0% or as high as 6% loadfactor. Needless to say, this p****d me off.
So I responded. I increased frequency as high as I could by purchasing a plane and leasing in several more. Then I dropped my prices to be around 5 Euros lower than the lowest price. This seemed to work, as it gave me 100% loadfactor and I was still making money.
But then the very next day (real time), the flooder had responded with a price around 1 Euro lower than or a price that matched mine. Usually, most of the competition had done the same thing, except for a couple of airlines that either don't play anymore, or don't care.
Things went round in circles like this for a bit, and as far as I can see, they will keep going around in circles. We'll all be dropping prices to try and keep our loadfactors at a sane level where we can make a profit, and the flooder will probably move onto other markets and routes where we all compete and flood them out too. The only place I see this price war going is the wonderful, fabled land of the 1 Euro fare.
Together, through all this price dropping and market flooding, we've shaved one hundred thousand (100, 000) Euros off of my DOP, forced me to lower prices to around a third of what they were before, and forced me to purchase and lease aircraft I didn't want to purchase and lease, just so I could stay in the black.
I think though, that the flooder didn't suspect we'd all react quite so fast, and quite so well. I don't think that he'd planned to have competitors reacting to the flooding tactic by flooding the market themselves and lowering prices to (relatively) insane levels. I'm not sure if he's thought it through enough - because the way I see it, there is only the 1 Euro fare territory to go into next, and I'm not sure that he or anyone else wants to get into the 1 Euro fare territory. Especially given that for us, 1 Euro fares would be barely profitable, and in many cases, not profitable at all.
Although I'd really rather not go into the 1 Euro fare war, I will. And I'll fight it to the death, as well. I'm happy (although I'm not actually happy to) to go into the realms of losing money on some of my routes if it means it shuts this guy up and makes him realise what a ridiculous thing he's doing.
As an aside, I don't really see the point to what he's doing - my research showed that we all had 95%+ loadfactor on all our routes before he engaged in the flooding tactic. My research also showed that our prices were pretty high - around 3 times as high as they are in real life here (and in real life, we have a monopoly flag carrier, too), and that everyone should have been happy with things as they were.
Sure you might get some kind of long term benefit by causing a player or two to exit from that route, freeing up a tiny amount of extra passengers. But it won't be much, and there's too many hungry competitors sharing our routes for much of it to go to you, anyway. Not to mention that there's always a new player just around the corner.
And let's say you do pick up all these hypothetical extra passengers that are released into the market because someone folded. They (and a large percentage of your other passengers) can always be taken away from you by flooding the market with low price, high frequency fares... a never ending circle really, that can only end in 1 Euro fares if left to itself, or end in relative happiness if it's controlled now.
I'm not sure what the point of this was, but there you have it.
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Oh, and to further support my point, here's a quote from someone who as far as I know, competes in a different market on a different continent:
2 of mine are on the route at $1 that somebody thought it would be fun to send a bunch of routes at $35 instead of the $300+ we were all charging :lol:
Emphasis mine.
If we can all have really great loadfactor at 300 Euro fares, why bother dropping your price to 35 Euros - it only ruins it for everyone (including you) by dropping their profitability and loadfactor, and it's not like it really makes the virtual pax all that happy.
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If you can't make money on a route, take your planes elsewhere to somewhere you can make money.
The guy with 20 frequencies and $1 fares is taking up a lot of hours on his planes and not getting anything out of it. It's his loss. You can make more money than him by starting a different flight with the plane you would be using on that route. When you've done that keep an eye on the old route, and if the guy raises his fares to the point where you can make money again then you swoop back in. If he doesn't raise his fares then he's just losing money for no reason, so you should just laugh at him.
I once had somebody put 72.5 frequencies against me on a route (72 on one plane, plus 0.5 on another). I was more amused than angry, since there was no way he was making money on the route. It may have made money on a daily basis, but when you factor in the 8 gates he had to rent at each airport and the cost of the plane he had to buy/lease to run the route there was no way he was making money on it. I just swallowed my (much smaller) losses for a bit until he wised up and pulled the route.
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the airline industry in the real world tends to have a real pack attitude towards pricing... it is nice to see it mimicked in game [though i admit the dynamics of 1 euro differences needs a little work still. along with one or two other tiny quirks].
I was reading an article earlier today about the fuel surcharge in the States. airlines keep trying to jack it up but every time have failed and it's dropped back to its old levels. when one ups it, all the other majors follow... when one backs off the rest back off again. always interests me how the game mimics this behavior on routes [as there's few to no fun "hidden/passenger fees" to play with 'ere].
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Look, Im almost at that point to price 1€ fare because of some very very -----Airlines.
Pricing 1€ when everyone is pricing 150% more. Do they make money? I dont know but me pricing at 150€ can. I guess they can't realiaze that, but then i think they're planning to dump more frequencies and therefore Im getting ready for that moment.
LOL the 72 freq. is really stupid, I also thought of the gate use and frequencies thing which after you do some math you will realize that it's really not convenient.I closed some routes, and there are also routes where even if i price the lowest won't make money at all.
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sometimes there are other reasons why airlines keep on pulling down the price to 1euro....
these airlines.....as you say...they do not aim for profit...
maybe they aim at the pax no, occupy the gate, or simply wipe the opponents off.....
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Someone from one of my routes run 63 frequencies. I really don't mind him doing that. Imagine, he's renting 7 gates from a 250k airport and another 7 gates for the 300k airport just for the 63 frequencies. I'm sure he's losing a lot of money on that route.
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That's exactly what I'm hoping happens to this gy - he gets burnout. Sadly, though, most of the airports (except three) in theis country only cost 50k for a gate.
This route in particular leaves from a 100k gate and arrives at a 50k gate. So, it's only 150k for 10 frequencies. He's doing 20, so thats 300k. Plus let's say he's leasing an aircraft at 200k a month. That's 500k a month, and I used to make 20k daily profit on that route. Let's say he's making 15k. 15 x 24 is 360k, so he's making around 60k profit monthly on that route.
60k monthly isn't much, but it's enough that I'd keep sticking with it.
Fortunately, I think this constant price dropping is going to get to a point where he loses profitability faster than I will (as I only need 1 pair of gates as opposed to 2 pairs), at which point I'm hoping he'll cut the s**t and pull out a bit - at least back to sane levels.
I still can't get why he's ruined the status quo for everyone by flooding the route with low price high frequency fares. He could have been making so much more money - we all could have. And I know he's not doing it to protect gates that were tagged for return, as I saw that he rented these new gates just before he did the flood tactic.
The only possible reason I see is that he's trying to shut down other players and kick them out of the market. Hopefully the rest of us have enough stickability to stay in the game until he begins losing money on that route or just decides to pull back to sane levels.
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The only possible reason I see is that he's trying to shut down other players and kick them out of the market.
Yes, I think this is his intention.
I closed some routes, and there are also routes where even if i price the lowest won't make money at all.
And as you can see by the statement above it works sometimes. As long as people close their routes due to 1 EUR fares those people will still start high frequency flights.
Maybe one day there will be rules, restrictions or whatever that will prevent us from adjusting route fares four times a day - more realistic. I cant think of a solution but maybe there could be a restriction to the number of price adjustments (once a game month or so :roll: ).
Nope, I dont want to start a discussion about that. Has been discussed before and I leave it to the staff making (no) changes to the game :D
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Maybe one day there will be rules, restrictions or whatever that will prevent us from adjusting route fares four times a day - more realistic.
Unfortunately, real airlines adjust their prices every 15 minutes... or more frequently :roll:
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Maybe one day there will be rules, restrictions or whatever that will prevent us from adjusting route fares four times a day - more realistic.
Unfortunately, real airlines adjust their prices every 15 minutes... or more frequently :roll:
Really? Hm, since two years I pay about the same on a specific route. Just a little more because of the higher fuel price.
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I think he meant it ironically.
A few options would be (yes I know all of these options have been talked about a lot already):
Introduce runway restrictions
No more 6 bases
Restrictions on buying of aircraft
Waerth
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I think he meant it ironically.
If so, he got me :shock: Sometimes it is hard to find out if dktc is joking or meaning it seriously :roll:
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Actually, I am quite serious this time.
I remember reading some articles about airlines' pricing strategies, and some airlines (esp. US-based ones) do change their prices every 15 minutes (esp. the online fares). This is not an uncommon practise in the hospitality field. Some hotels do so as well. It is not really that hard as they use the current projected occupancy, historical data, competition, and some other factors and put them into a formula. It is done mostly by the computer anyway.
I recall a certain website say that the price is only valid of 15 minutes as well, and if you have not be active for 15 minutes, you would need to go through all those clickings again because that airline / hotel (which I can't recall) would not let you book after the time limit is up~
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Maybe one day there will be rules, restrictions or whatever that will prevent us from adjusting route fares four times a day - more realistic.
Unfortunately, real airlines adjust their prices every 15 minutes... or more frequently :roll:
Really? Hm, since two years I pay about the same on a specific route. Just a little more because of the higher fuel price.
Prices for the same [literal] flight do fluctuate a lot, though the averages [route wide] tend not to fluctuate as much. Generally buying a ticket last minute is significantly more expensive then booking a flight 3mo in advance.
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Nowadays airline prices are so fluid that it's even told - only half jokingly - that in any given flight probably no two passengers payed the same fare.
Where AM differs substantially from "real life" is that in the real airline business a 0.01€ change at the very last second does not mean the difference between a full plane and one at less that half capacity. That, plus incredibly low costs, means AM can become at times more of a shoot 'em down type of game instead of a management sim.
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If AM allowed airlines to set differing service levels that would help a lot with the cutthroat aspect of the game. Unfortunately that's probably a ways off given all the other stuff the staff has on their plates.
With increased costs you'd probably see a lot more airlines going bankrupt. While it would be more realistic, it would also make the game nearly impossible for a newbie who joins mid-round. Maybe one of the worlds in multiworld could be an 'advanced players only' world with much higher fuel, crew, and other costs.
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the airline industry in the real world tends to have a real pack attitude towards pricing... it is nice to see it mimicked in game [though i admit the dynamics of 1 euro differences needs a little work still. along with one or two other tiny quirks].
I was reading an article earlier today about the fuel surcharge in the States. airlines keep trying to jack it up but every time have failed and it's dropped back to its old levels. when one ups it, all the other majors follow... when one backs off the rest back off again. always interests me how the game mimics this behavior on routes [as there's few to no fun "hidden/passenger fees" to play with 'ere].
hah, yes. although i think the latest of $40 from American, matched now by Delta, is sticking...though this surcharge is not on any routes that low-cost carriers (Southwest, AirTran, JetBlue, etc.) fly.
maybe one of the things that may be useful so that we can see when things are moving around is sort of a display of our fare and the average fare on a route, displayed on the "view routes" page? i mean, that's pretty much how the airlines do it...they have a team (revenue management) monitoring prices.
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Why is flooding called a tactic btw? When I hear the word tactic I thnk of something someone had to work hard for to come up with and use thier brains for ....
This flooding is neither .... not hard to come up with and no brains required.
Waerth
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Why is flooding called a tactic btw? When I hear the word tactic I thnk of something someone had to work hard for to come up with and use thier brains for ....
This flooding is neither .... not hard to come up with and no brains required.
Waerth
It may not be hard for you, but might be for others. Be kind. :wink:
As my best friend loves to say, "We can't blame brainless people. It is not their faults that they don't have a brain." :P
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Why is flooding called a tactic btw? When I hear the word tactic I thnk of something someone had to work hard for to come up with and use thier brains for ....
This flooding is neither .... not hard to come up with and no brains required.
Waerth
it may be a tactic at the most basic level, much as "counterattack", "passive aggressive" and a few other broad flavors of more detailed tactics are. in AM a basic tactic would be 'flooding' whereas the precise points of flooding and their fleet composition and refinement [to mitigate your losses and inflict maximum damage] may bring in potentially the intricacies the likes of which won Napoleon many a battle.
And, actually what i hear the $40~ fuel surcharge sticking is a rarity. "a few routes", is hardly sticking. "a few routes" can [in reality] charge a fare of over $1,000. this doesn't mean that "fares are rising", nor that high ticket costs are sticking.
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And, actually what i hear the $40~ fuel surcharge sticking is a rarity. "a few routes", is hardly sticking. "a few routes" can [in reality] charge a fare of over $1,000. this doesn't mean that "fares are rising", nor that high ticket costs are sticking.
Unfortunately, it's sticking a little more and more now...and the deals that come through my inbox every Monday night/Tuesday morning are becoming rarer. i don't think my travelocity alerts have sent me anything for nearly a year now...i guess it's time to reset what is a "cheap" price.
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the airline industry in the real world tends to have a real pack attitude towards pricing... it is nice to see it mimicked in game [though i admit the dynamics of 1 euro differences needs a little work still. along with one or two other tiny quirks].
I was reading an article earlier today about the fuel surcharge in the States. airlines keep trying to jack it up but every time have failed and it's dropped back to its old levels. when one ups it, all the other majors follow... when one backs off the rest back off again. always interests me how the game mimics this behavior on routes [as there's few to no fun "hidden/passenger fees" to play with 'ere].
Air Elbonia, it is so hard to get a price increase to stick for carriers IRL. for a price increase to stick, everyone has to agree to it within a reasonable time - whereas only one person has to lower prices for everyone to lower them. I've seen examples (like these fuel charge thing) where people like AA start a 20$ fuel surcharge, DL, NW, UA match on the overnight price transmission but CO sits out. Sometime the next day DL, NW, UA all pull back to a 10$ surcharge and CO comes in with the 20 surchage but it's too late. they missed their chance. Crazy Stuff.
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And, actually what i hear the $40~ fuel surcharge sticking is a rarity. "a few routes", is hardly sticking. "a few routes" can [in reality] charge a fare of over $1,000. this doesn't mean that "fares are rising", nor that high ticket costs are sticking.
Unfortunately, it's sticking a little more and more now...and the deals that come through my inbox every Monday night/Tuesday morning are becoming rarer. i don't think my travelocity alerts have sent me anything for nearly a year now...i guess it's time to reset what is a "cheap" price.
:( unfortunately? when fuel prices go up - ultimately that cost should be passed to the customer. Most airlines have a problem passing 40% of the fuel increase to customers.
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Hense why many US carriers are struggling in the profit department. If they all played ball with the surcharges and stuck to their guns they'd all be better off. Although that would be seen as a cartel agreement and they're not allowed are they :wink:
Rob