Low cost airlines ticket price

[vanderwayne]

Hi everyone

I have a few questions on low cost airlines? Can someone explain to me how their ticket prices work? Is the price of the ticket dependent on how many seats are left? As tickets are sold, the price increases? How do they calculate the start price before any seat have been sold? Example, if I buy the very first ticket for a trip from milan to amsterdam, and it costs me 40euro, how did they come up with that number?

Can the low cost system be applied to smaller prop and turbo prop aircraft? twin otter, beech 1900?

[Piltdown Man]

Seat pricing appears to be "White Man's Magic." However you look at it, the price will depend on emotion as much as economics and route competition. But all airlines, without exception, screw the maximum they can for every seat. The people who do the sums (sometimes call Yield Managers) guess how much traffic there will be and have a rough idea as to when people will book. The people who would like to fly (VFR and holiday traffic) look at seat prices early and buy when they think the price is right. If the price is right, people will go to destinations they haven't even heard of. As the departure date looms, the spare seats will be either be dumped at a discount or sold at a premium, it all depends on route history and the airline's policy. However, if the Yield Manager has done their job, the last few seat will be sold at a premium to those to have (business, funerals, births etc.) to travel.

When small aircraft are being used correctly there is a low variable demand and/or a small fixed demand. Either way, normal mass market yield management techniques won't really apply as this is a specialised, niche market where people buy on service availability rather than price.

PM

[Capetonian]

Piltdown Man has given a good, if cynical, overview of the very complex task of maximising the revenue from every seat. The right seat to the right passenger at the right fare sums it up. The ideal YM system would ensure that every seat on every flight was filled with the highest possible yield passengers, and that there was no 'spill' (passengers lost as result of waitlisting who might book on another carrier, or not at all.)


How do they calculate the start price before any seat have been sold?
This will be a correlation between actual cost per seat averaged out, and the maximum they think they sell each seat for. In theory they could start out at 1 currency unit for the first seat and then increment. There are regulations which mandate the minimum number of seats which may be sold at the lowest advertised fare, to stop an airline from selling fares 'from 1p one way' but only having one seat per year at that fare. I don't know what those rules are, in fact I wonder if a certain Irishman does!