MilesBuzz! - It can't be about the fares

It seems to me that our current drop in traffic is not a result of fares being too high (at least not leisure fares), so why are the airlines keeping prices low? Few passengers are being wooed into the air by low fares.

United needs 96% load factor to break even at current fares. Why not raise the price 10%? If the plane holds 100 people, then instead of needing 96 revenue pax, you only need 87. Combine that with union concessions and we're back to reasonable, achievable load factors.

Presumably, all the airlines are hurting and would have to see the reasonability in following suit, except Southwest. So here's the test... Raise the price 10% in a few test markets to see a) who'll follow and b) how many pax are lost if they don't follow.

I'm sure it seems like heresy to say this here, but come on, I want my airline to survive. I pay around $200 for almost all my tickets, and $20 more isn't unreasonable.

With the higher price, you should bring back my meal service to make sure it's not so easy to jump to Southwest, but a 9% reduction in systemwide required load (before union concessions) should be able to accomodate the return of the food.

But that assumes that 87 people are willing to pay the higher fare. In practice, airline fares are segmented -- 10 people pay the higest fares, 10 people pay middle fares, 10 people pay the lowest fares, and so on and so on into more and more segments. That way, those top fliers by revenue make your flight profitable, while the rest are basically a little bit of gravy (since per person extra cost for a flight is nearly nill -- same crew costs, negligible fuel difference, and now no meal service cost differentiation).

The airlines routinely do this. Each airline has a department dedicated to revenue or yield management teeming with analysts responsible for fares in different markets. They constantly adjust fares and inventories and often play the "let's see who will follow" game.

If the airlines felt that:

a) fares (on an industry wide basis) are currently set below the profit maximizing point for the current market demand profile

and b) that the other arlines would follow if they raised their fares.

Then it would have already happened.

This is to say -- you seriously underestimate the effort the airlines undertake to set fares.

Robb:

You say that you'd gladly pay $20 more on a $200 ticket to keep your airline alive.

First of all, do you, yourself, pay for your travel? Or, are you a salary-sucking corporate drone, burning through shareholder money? Or, are you some kind of independent consultant who merely charges your unwitting clients as you traipse gleefully around on their tab?

Second, how often are you in the air? Once every few months on an excursion fare, in which case $20 a shot wouldn't be too much to absorb? Some of us are in the air or at airports on any given week more than we are in our own beds at our homes or crash pads.

Third, consider your statement of helping your airline to survive in light of the cutbacks that the airlines are making. Not just slashing the meals and amenities, but the laying off of staff at $30,000+/year at a pop, *not* including benefits. Are you still telling me that you're willing to pay more for getting less?

Third, if an airline can't make money or otherwise manage its profits on the fares they're charging, what makes you think that airlines will become any better managed if you just throw more money at them? You seem to forget that Georgie W. just threw $20 bn of your and my hard-earned tax money their way...

Earth to Robb?! Earth to Robb?!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ETOPS01:


Or, are you a salary-sucking corporate drone, burning through shareholder money? Or, are you some kind of independent consultant who merely charges your unwitting clients as you traipse gleefully around on their tab?

</font>

So let me get this straight. If we don't pay for our travel ourselves, the two remaining ethical/professional profiles are that of drone or shyster?

I'm also offended to be labelled a drone just because I work for a large company. I've convinced a co-worker to fly ATA to Chicago to save $700; even to fly out of JFK to MCO instead of LGA to save a whole $68! I don't share directly in any of the travel savings I find, but I still try to minimize expenses as if it were my own money.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ETOPS01:
First of all, do you, yourself, pay for your travel? Or, are you a salary-sucking corporate drone, burning through shareholder money? Or, are you some kind of independent consultant who merely charges your unwitting clients as you traipse gleefully around on their tab?
</font>

I too feel reasonably certain there was a nicer way to make your "point," ETOPS.

There is wide range of reasons that travel volume is down. Don't even think there is just one reason. Sadly, we are causing most of it. We meaning, American people.

1 - Fares. Though you may be able to find $200 fares, of the dozen flights or so since 9/11, I would guess my avg is more like $600. Some due to last minute, some not. So, for some people, fares are an issue.

2 - Economy. Just before 9/11, companis were already cutting back. This just added to it.

3 - Fear, part a - Fear of flying went up. Some just want an excuse not to fly, some are truly afraid. Everyone keeps pointing to this one, but I believe the percentage is a long ways from reality.

4 - Fear, part b - Fear of the militia running the airports now. Everything going on, from reduced parking, long lines, unknown and foolish confiscations and reduction of freedom does scare people away. This is causing people to say they are afraid to fly.

5 - Time. Reduced flight schedules. Sometimes you can not get a flight when you need it. Then you add in the unknown hours wasted in lines, for very little value and you decide it is just not worth it.

Businss travelers, able to fly last minute on convenient schedules with ability to run into the airport with hassles fuel the airline business. We have taken that away.

quote:
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"...United needs 96% load factor to break even at current fares.

Why not raise the price 10%? If the plane holds 100 people, then instead of needing 96 revenue pax, you only need 87.

Combine that with union concessions and we're back to reasonable, achievable load factors..."
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If you believe the 96% figure......are you interested in buying a bridge?

The 100/96/87 is to simplistic because of the huge variation of fares....8 times is common from low to high.

Yeah, big union consessions and management not planning on $148MM for buying/selling an airline. I still remember the striking Eastern Airline employees spitting on me and throwing beer bottles at me at SJU as I went to the airport to try to get alternate bookings on AA and DL. Really nice kind considerate people as they drove that ill-run airline into Chapt 11.

You want to buy that bridge now?

MisterNice

You remember whhaaaaat????? Throwing and spitting??? This is MUCH more interesting - tell - tell!!

I'm going to ignore that tirade and wait for moderator action, but I do want to reword what I kind of hastily posted late last night.

I can't believe that demand for air travel is very elastic to prices right now. If they cut prices with a huge sale, many passengers still wouldn't come back, so why keep fares so low?

Why aren't they trying to raise fares? At least, why aren't they trying to shift the balance so that business passengers get a break, while leisure passenegrs pick up more of the tab?

Maybe a lot more passengers than I think have to pick the absolute cheapest fare, but if so, then how to frequent flyer programs stay around?

Think about the last ticket you flew. If it were 10% higher would you have not gone on the trip? Would you have gone on another carrier who kept the original fare?

If enough of you say yes to either question, then it's a bad plan, but if enough of you say no to both questions, then it seems like a resonably low-impact way to solve the problem.

If you think that the problems the industry is facing are management's alone, you're sadly mistaken. All of us: passengers, FA's, pilots, baggage handlers, res agents, concessionaires, porters, skycaps, cab drivers, airline shareholders, business owners, municipalities, national guardsmen and women, mechanics, etc. are participants in this industry and we all make our contribution and we all derive our benefits. That's what an economy is all about. It's not supposed to be adversarial, but a system in which everyone brings something of more value to the other groups in exchange for something of more value to them.

If you wouldn't change your ticket, then you must still be getting a reasonable trade, even if it only becomes reasonable when you say that you're making concessions to the overall good of the system, becuase it's better than facing a world with fewer carriers (lower supply) that drive prices upward and/or service downwards to the Southwest model.

Or you can bicker, moan, whine, and form a passengers union to fight with the rest of them.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Think about the last ticket you flew. If it were 10% higher would you have not gone on the trip? Would you have gone on another carrier who kept the original fare?</font>

No to both questions (by the way, last ticket I flew on cost several hunderd dollars).

Yes, and yes. I fly on the cheapest airline possible on most of my routes, even if it means no elite benefits for me.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by robb:
Think about the last ticket you flew. If it were 10% higher would you have not gone on the trip? Would you have gone on another carrier who kept the original fare?</font>

The answer to those question is no. Let's put it this way -- Southwest is usually the cheapest airline for me. But to get that fare, I have to go all the way to BWI, stand in line for two hours because the people flying Southwest tend to be leisure travellers without a clue, and so on.

So I spend the extra $50-100 to just hop on United, where I know that I can use the premier line, where I know I don't have to deal with the cattle call crap, and so on.

Hey, it's my budget. I'll spend it the way I see fit, and as long as I don't go over it, my bosses are happy. When it comes to vacation, that's when I want to fly up front so having the e-upgrades is pretty important to me.