How airlines loose passengers (1)

[The Sleeping Pax]

Let's suppose there is an airline that for 4 years or more has been able to successfully fly a good route over a medium to long distance of say 6 -7 hours duration. Let's say the cost has always been around $1200 Business Class Return give or take $150 or so dependant on the season. Let's also suppose that the airline has a good safety record, good punctuality, and a satisfactory if not quite excellent in-flight service. Let us also suppose that the Business Class section is almost always 90 % full.

How does the airline keep its loyal Business Passengers if suddenly, it raises the price of the Business Class flight from $1200 to $1800?

How does the same airline keep its loyal Business Passengers if a competitor, with the same good safety record, similar punctuality record and an excellent in flight service can carry the same Business Class Passengers flying the same route can charge only $1050?

Surely one of them is going to lose money as passengers desert it to the cheaper carrier or the other carrier is already loosing money hand over fist by not charging enough?

Any answers?


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Wake me up when we get there

[Self Loading Freight]

How many business class travellers pay their own fare? In my experience, most companies have a preferred airline and that preference doesn't change very often. If the fares go up 50%, that may not be enough to prompt a change for many months. When it does, that airline may lose a big chunk of custom.

But then, any sensible airline (stop giggling at the back there) would already have negotiated special deals with customers like that, and the off-the-shelf ticket price changes won't necessarily reflect this.

And then there are the informal cartels...

As for a price disparity for years between two carriers over the same route: the way airlines make money is a complex equation. Last time I looked, most of them didn't a penny -- one of the ongoing mysteries of aviation, that. But as they're burning the same fuel in the same aircraft with the same maintenance and incidental costs, the only ways one company can undercut another is by being more efficient, not offering as many frills, loading the economy fares, or by having other sources of revenue.

This latter idea is, I feel, going to become more important, especially when decent Internet access becomes available in-flight -- you've got a hundred well-paid businesspeople locked in a small room for seven hours and you can offer them Internet on *your* terms?

Ker-CHING! Dotcoms have had nine-digit IPOs on business plans more vacuous than that.

R



[This message has been edited by Self Loading Freight (edited 21 July 2000).]