We have all heard the litany of money-losing quarterly reports from the legacy airlines. This begs the question — why not raise fares?
If the cost of getting to Point A from Point B is, let’s say, $300/available seat and the average load factor on a 100-seat airplane is 75%, then the airlines should charge $400 to break even.
It seems that the airlines are continuing to sell airline tickets for less than it costs them to actually transport the passengers and them attempting to make up the difference with a plethora of obscure fees and income from frequent flyer programs.
Whoever raises their fares may lose a few passengers, however, they may be around to fly another day. With the airline industry major airlines each hovering around a 75% load factor, everyone can’t shift their business.
Plus there are many other factors that affect decisions about what airline to fly.
• Is the flight nonstop?
• Frequent flyer programs
• Type of aircraft
• Airline loyalty
If price were the only factor, Southwest Airlines would have a wait-list for every flight, when in fact, their overall load factor is lower than the overall load factor of legacy airlines.
According to airline pricing gurus, I am way off base, however, it seems that common sense should be explored every so often.
{ 2 comments… read them below or add one }
Charlie, they should price their products so that they can make a profit.
They could also reduce the amount of rules everyone needs to get a discount.
We have all heard the litany of money-losing quarterly reports from the legacy airlines. This begs the question — why not raise fares?
=================================================================
Consumers have been spoiled for decades with cheap fares. They’re price-sensitive. Raise the fares and they dont understand why they’re paying an increase for the same seat they sat in last year at a cheaper price. Raise the fares and your competitor on the same route may not. Profit margins are RAZOR THIN. Raise your fares and they show up on the internet, several pages within the site. The majority of internet consumers will click on the first few pages in search of the cheapest fare. Thus, the higher fare is buried in the site. And, most equally important, raise the fares and some people just wont travel altogether.