The skies are friendly; the passengers are not

Going for broke

Mon, 2008/09/08 - 21:23 by aargh

Talk about going for broke: United's stock price took a plunge from roughly $12 to just pennies due to an errant bankruptcy announcement. The official end-of-day reports show it hit a minimu price of $3, but I could have sworn I saw just one cent shortly after the announcement. That's a 99.9% drop for the mathematically inclined among you.

For those who prefer visual aids, here's a chart of today's UAL stock price movements (the clock is based on Eastern time):

stock price chart

That asymptotic drop around 11AM? That's when the news hit.

The story itself was genuine, yes; but in UAL's defense they issued the statement six years ago. Hats off to the Florida Sun-Sentinel and their journalistic expertise. They could pick up some quality-control tips from aateur blogs. Just not this one.

Better still, this panic about United sank other airlines' share prices as well. Sounds like investors were expecting another industry-wide crash. Here's American Airlines:

stock price chart

(Same drop around 11AM!)

... and here's Delta:

stock price chart

(Thanks to Yahoo! Finance for the charts.)

"Six-Year-Old Story Causes United Airlines Stock to Plummet"

"United shares gyrate on rumor: Tell us how this affects you.",ual090808.article

"Inside The UAL Story Debacle"

Not to be outdone, Jet Blue announced fares (but not shares) for mere pocket change. The airline put some tickets and vacation packages on eBay and started the bidding at five cents.

I almost shed a tear when I saw the headlines. An airline had heard my cry and was experimenting with a more market-based model to hock its wares. Any day now, Jet Blue would change their own website to an auction model! Both airline and passenger will share the concept of a seat's value and act accordingly! The hazy mystery of ticket prices will become clear and all will be well in the world. Why, I think I'll buy a ticket now, just to participate in this marvel!

Then I read the fine print: it's just a publicity stunt. Apparently Jet Blue is trying to take a bigger bite of the eBay-using market share.

Too bad. Moving to an auction-based fare model would have let Jet Blue eliminate fare buckets so customers could compete with each other over prices. (I'll get to fare buckets another day. For now, simply search for that term along with "price discrimination" to get a 777-full of articles on airline pricing strategies.)

Best of luck with those actions, Jet Blue! Sadly, that news paled in comparison to the United price drop. Again, notice the dip at 11AM:

stock price chart

"Going, going gone: JetBlue auctions flights on Web"

"JetBlue Airways is Nickel-and-Diming Fares! Flights and Vacation Packages Now Up for Bid On eBay Starting At Five and Ten Cents* Each"