Earlier this week, something strange caught my eye: Delta flights between Portland and Tokyo Haneda (starting in October) cost $10,766 for a roundtrip economy class ticket. This is not some strange price spike on certain days, it’s the case for literally every single day of every month for the rest of the year. What on earth is going on here?
First, a little bit of background. Delta halted this route at the beginning of the pandemic. They’ve continually pushed back the resumption of this route and one between Minneapolis and Haneda, presumably because there hasn’t been enough demand to justify it.
Here’s the problem, though. Slots between the US and Japan are a hot commodity and are granted by the US Department of Transportation for specific cities since the US entered into an agreement with Japan in 2010.
Rather than give up its Portland slot, Delta filed a motion with the Department of Transportation asking whether it could transfer the slot to another city, arguing that this would allow the airline to offer consumers lower prices.
Delta gets sneaky
So that’s the end of the story, right? Wrong. Instead of simply giving up the slot or resuming normal service from Portland to Tokyo, Delta has jacked up prices to absurd levels: $10,766 for a roundtrip economy class ticket and $21,202 for a round trip business class ticket.
The fact that these prices are presumably beyond what any reasonable consumer would pay, especially considering they could fly through LAX or Seattle for nearly one-tenth the price, leads me to believe something funny might be going on.
Specifically, it seems like these insane prices are Delta’s attempt to obliterate demand for the Portland slot and justify their request to the DoT.
United Airlines’ chief communications officer agrees, saying that “it’s clear they’re gaming the system,” and that Delta’s extreme pricing is “probably a tactic [to] sell the fewest number of tickets.”
He continued: “They can say, ‘See, nobody’s buying our $10,000 tickets from Portland to Haneda. So, because nobody wants to buy those tickets, you should allow us to fly from somewhere else.’ Delta should not be able to undo [the 2019 HND slot pair allocations] four years later.”
Delta’s ploy didn’t work
It seems that Delta’s trickiness didn’t pay off: their request was denied earlier this month, with the DoT saying that allowing carriers to choose different slots serving Haneda would “defeat the Department’s rationale for selection of the existing carriers and gateways over the competing applicants and would undermine the Department’s public interest determinations.”
This is all an amusing study in airline strategy and regulatory oversight, and Delta’s approach suggests a bold though ultimately unsuccessful attempt to game the complexities of slot allocation. Now that Delta’s request has been denied, it’ll be interesting to see whether prices come back down to normal, or whether it abandons the route altogether. If they do want to keep the slot, they’ll need to begin selling tickets soon.