In crowded markets like Dallas and New York, airlines routinely slash fares in order to court price-sensitive flyers and compete with ultra low-cost carriers.
On the airline’s fourth quarter earnings call today, Virgin America executives said their strategy of refusing to discount fares is helping the company build its business in a sustainable way, even if it makes them less competitive on price.
The company met its earnings expectations for Q4 2015 but projects that ticket sales will slump year-over-year in the first quarter of 2016.
“We are not going to fly passengers at fares that don’t make money,” said Virgin Atlantic CEO David Cush, when asked how the airline can compete in Dallas without discounting. “What we’re going to do is make sure we get average ticket value to a place where it’s sustainable and we get a return.”
When asked by an analyst whether the discounting and merchandising of fares by the big three carriers is a threat to Virgin, Cush explained that the company is focused on providing a standard level of service across its entire fleet.
“Part of the problem right now is not only the fares, but the rules about the fares,” said Cush. “If your thesis is that the other big carriers are going to create this ‘economy minus’ product and then not only segment by product, but actively by advance purchasing and other things, then that’s tremendously beneficial for us. We’ve decided to ignore that portion of the market. If American and others go in and strip their product, then we’re going to be able to compete a lot stronger.”