I am now on GF website and sourced for a fare DXB-BAH-FCO return ticket in business class. Dept. 27/Nov and back on 02/Dec. There are three fares options, the cheapest being of approx 1200 EUR. Now I will change the origin to Bahrain, so direct flight BAH-FCO: 1,930 EUR. Other airlines do exactly the same, Qatar Airways, Emirates, etc. No one seems interested in the passengers from their own country of origin which should be the opposite way around but the reality is that direct flight passengers are heavily penalized for some reasons. Can anyone explain the logic behind this pricing system which seems well shared among all carriers?
You are thinking that since it is further and there are more flights flying DXB-BAH-FCO than BAH-FCO the first should be more expensive (or not cheaper) than the second. If GF priced on a cost plus basis this is what you would get. But if GF did that they would likely get little or no sales out of DXB.
In pricing DXB-FCO GF has to take into account what is happening in that market, not the market from BAH. They look at the prices charged by EK and AZ(?? not sure they fly), and the prices charged by EY and all the six freedom airlines in the market. i.e. QR KU SV RJ ME MS TK CY etc. They've decided that the best price for them is €1200. Anything higher than they don't get the business, anything lower they spill revenue.
Their only real decision is if they want the traffic at €1200. Will it displace BAH origin passengers willing to pay €1930? Will it displace other origins that might have higher fares. Using Revenue Management they will open/close availability to hopefully generate the perfect mix - all seats sold at the maximum possible revenue.