Annex 3
FARES ON DOMESTIC ROUTES
Care needs to be taken when comparing the fares
charged by British Airways and British Midland. Both offer up
to 20 different fare types on UK domestic routes, each with different
conditions attached. Many of these fares are the same. For example
a fully flexible one-way ticket on Heathrow-Manchester costs £108
on both carriers and £139 on Heathrow-Glasgow. But British
Midland offers three day return fares that BA has never directly
matched.
The general pattern of price competition between
the two carriers has been for British Midland to offer fare reductions
on entering a market such as London-Glasgow but for that gap to
be eroded over time so that the two carriers end up charging the
same basic fare. We would expect the same pattern to emerge in
any US markets entered by British Midland. However the scope for
long term fare reduction is likely to be more limited than was
the case in the UK domestic market of the early 1980s. The US
markets being considered by British Midland are highly competitive
and a surplus of capacity has been driving down fares for some
time now.
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