Originally Posted by
LGS6753
the marginal cost of any additional seat occupied is minimal (a bit more fuel burn and some in-flight catering). Therefore any cash raised from concessionary seat sales is a bonus.
This is back to my area again.
This often-heard comment ("offer the remaining seats cheaper, it will give at least some extra revenue") is false for a number of reasons.
First is a commercial phenomena known as "revenue dilution". Simplistically this is that, while you may get some extra revenue from those who might not have travelled with you, equally you get some passengers who would have paid the higher price but who, when they come to book, find the lower price is on offer and buy that instead. Dependent on the relative balance of the numbers involved, you might even find you end up with less revenue than if you had not made the offer, although you haul more people. So be certain those cheap fare travellers are not your potential full fare travellers.
Then there is the subsequent perception of those travelling at the reduced fares. If you have paid £750 on one trip, it is a very difficult decision to pay £2,000 for the comparable product the next time. Your expectations are that the product is "worth" £750 now rather than £2,000. And if your regular passenger got one or two of these cheap fares, it becomes difficult to get them back at the higher fare.
Chap at our office got by chance one day a Ryanair 99p fare London to Dublin. It became a topic of amused conversation, of course. But next trip his travel request was refused by the beancounters with "why haven't you got the 99p fare again", and it wasted half a day of his time overcoming this. Third trip the same. End of amusement. Watch you don't do something with your pricing that hacks business travellers off like this. Likewise someone who has paid £2,000 and is seated next to someone crowing about a £750 fare is another fast way to turn off your high-fare regulars.