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Old Apr 28, 10, 6:05 pm   #1
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Why do airlines not offer last minute empty seats cheap?

I understand that part of an airfare is determined not just by supply/demand but also convinience of travel. If someone books 1 day before flight date they pay a ton of money.

But why do airlines not offer empty seats cheap at the last minute? For example let's say there is a 757 going from JFK-MIA and after all passengers check in there are 3 empty seats left. If I show up at the airport and want that flight I'll end up paying $1,200. Why don't the airlines sell those empty seats cheap just to fill them?

If the seats are empty and someone shows up and says they'll offer $200 for them, why do the airlines say "no" and instead of $200 get $0 and keep the seat empty? Isn't something better than nothing? Why would the airline rather get $0 than $200?

We do this all the time at my company. If there are last minute seats and we want to fill them, someone calls and we'll say $x (usually 50% cheaper than anyone else paid) just to fill an empty seat.
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Old Apr 28, 10, 6:35 pm   #2
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You can't look at this question on a flight by flight basis. You have to look at the long term. If you sell empty seats at the last minute for next to nothing you are training consumer to expect that. How many people who would have otherwise paid $1200 two days before a flight will keep doing that, when the chances are that if they wait a day they could get it for $200? Um, that number would be close to zero. Therefore what you are suggesting is that the airlines throw away the sales for $1200 and replace them with sales for $200. Not a very smart decision.
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Old Apr 28, 10, 6:45 pm   #3
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Right or wrong, the assumption seems to be that holding out for last minute pax willing or forced to pay extremely high fares is more profitable than selling those same seats at a last-minute discount.

I don't know if any airlines has hard data to support this.

I agree with the previous poster, the official excuse is that if they lowered prices at the last minute, everyone would wait till the last minute to buy. I'm not sure I agree with that. Business travellers who have to be somewhere at a certain time probably wouldn't chance it, and I'm not sure there are extremely large numbers of leisure travellers who would either.

I might book tickets like these in addition to my regular travel, but I would never buy them for regular travel, ie, I might use them for spur of the moment visits to family or long weekends somewhere.

It would be interesting to see an airlines try selling heavily discounted seats at t-24 - maybe in coach only, non-mileage earning. Might fill some otherwise empty seats with folks flexible enough to travel last minute, particularly if they couldn't use the fares as mileage runs.
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Old Apr 28, 10, 6:51 pm   #4
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If such seats could be sold, full fare business passengers would simply buy the last minute fare, ride on that ticket, and then ask for a refund from their fully refundable fare.

The proposal does not work so long as there are fully refundable passengers out there who could arbitrage and change to the last minute cheap seat at the last minute, at no loss on their refundable fare.
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Old Apr 28, 10, 7:45 pm   #5
 
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Quote:
You can't look at this question on a flight by flight basis. You have to look at the long term. If you sell empty seats at the last minute for next to nothing you are training consumer to expect that. How many people who would have otherwise paid $1200 two days before a flight will keep doing that, when the chances are that if they wait a day they could get it for $200?
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The proposal does not work so long as there are fully refundable passengers out there who could arbitrage and change to the last minute cheap seat at the last minute, at no loss on their refundable fare.
It seems to me that classical economic market logic invalidates the above arguments. If there are last minute $200 seats available, there is going to be keen competition for them, meaning that it will not be the case that "the chances are that if they [the passengers] wait a day they could get it for $200?" If there are 3 $200 last minute seats available, there will be 12 passengers who want them, and only the lucky 3 who get in line first will get them. So what passengers will learn is that if they wait until the last minute, they are not likely to get one of the cheap last minute seats.

Similarly the logic of the market would seem to refute the second objection. Due to competition for the scarce $200 seats, full fare passengers could not have a reasonable expectation that they could "change to the last minute cheap seat at the last minute, at no loss on their refundable fare." They would be gambling that they could do this, and the odds would probably not be very good. Nor does it seem true that there's no down side to such arbitrage attempts: the down side is that buying a fully refundable fare so you can cancel it if you luck out and get a cheap last minute seat means that you've foregone the opportunity to buy a cheaper non-refundable or partially-refundable seat and just use it. And are there really any fully refundable fares -- with no change fees at all? Change fees of any sort would serve as a further disincentive to attempting such arbitrage.
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Old Apr 28, 10, 7:58 pm   #6
 
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This is the business model that cruises use. But.....

Cruises have casinos in which to spend money

Cruises sell excursions at the ports of calls

Cruises sell alcohol, lots of alcohol

They have gift shops

They have some food that is additional cost.

And you are stuck for several days.

The airlines have no revenue, or minimal, once you get on board.

So, while it makes since to fill the empty seat with at least some revenue, the initial replies are correct. The ultimate revenue would go down as people learned to adjust travel to the last minute. And except for the gotta get there today travelers, business travelers, they would lose revenue.

Hotels are similar to airlines. They will steeply discount but usually only only through blind agents like Priceline.

I fly WN a lot. They will often open up these available seats to reward travel at the last minute. They get to fill the seat and they get a reward off the books.
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Old Apr 28, 10, 8:21 pm   #7
 
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The model proposed is basically the way airlines used to operate. You'd pay full fare for tix far in advance from a travel agent and then the airline would offload unsold seats to bucket shops to sell at massive discounts a few days before the flight.

Then some carriers came along with different business models and sold the first seats cheaply and subsequent seats ever more expensively. The fact that almost all carriers have now gone this way suggests that it is more profitable and also helps cash flow by encouraging passengers to pay as far in advance as possible.
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Old Apr 28, 10, 8:41 pm   #8
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Originally Posted by Cha-cha-cha View Post
Similarly the logic of the market would seem to refute the second objection. Due to competition for the scarce $200 seats, full fare passengers could not have a reasonable expectation that they could "change to the last minute cheap seat at the last minute, at no loss on their refundable fare." They would be gambling that they could do this, and the odds would probably not be very good. Nor does it seem true that there's no down side to such arbitrage attempts: the down side is that buying a fully refundable fare so you can cancel it if you luck out and get a cheap last minute seat means that you've foregone the opportunity to buy a cheaper non-refundable or partially-refundable seat and just use it. And are there really any fully refundable fares -- with no change fees at all? Change fees of any sort would serve as a further disincentive to attempting such arbitrage.
I travel on fully refundable fares on business for almost all of my business travel because the plans can change on a daily basis. Heading out for a deposition in Chicago? Oops, witness can't make it, or his counsel cancels, or someone files a motion for a protective order, or etc., etc., etc.

Once I am already heading to the airport and KNOW I am getting on the plane, would I change it to a $200 last minute ticket if I could, instead of my $1200 fully refundable ticket? Absolutely. But you're incorrect in thinking that a passenger such as me can't have a reasonable expectation or would be gambling. We don't care if the low fare ticket is still there -- we are flying on the full fare refundable ticket no matter what. But we would take advantage of the lower cost ticket in many cases, thereby causing the airline to lose money which it currently earns from us.

And as to your question as to whether there are REALLY any fully refundable fares out there, with no change fees? There sure are. It's a Y ticket, fully refundable. I have not paid a change fee on this kind of business travel at any time.

Sorry, but I disagree with your classic economic market explanation. My economics degree says that market free riders, such as myself, would result in last minute cheap seat causing them to lose money, not earn some extra revenue.

By the same logic, why don't Michelin starred restaurants offer their last tables and meals at bargain basement prices if they are not full with reservations? Those seats will otherwise go empty and they will lose potential marginal revenue if they don't fill every seat in the restaurant for every seating.
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Old Apr 28, 10, 10:28 pm   #9
 
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imagine this, instead of booking prior people showing up in droves at the airport to find out what flights have empty seats and now they have a huge choice to select from if they are a bit flexible....it would be disastrous for the airlines.
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Old Apr 28, 10, 10:39 pm   #10
 
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imagine this, instead of booking prior people showing up in droves at the airport to find out what flights have empty seats and now they have a huge choice to select from if they are a bit flexible....it would be disastrous for the airlines.
That's what used to happen, except people showed up at bucket shops in their droves, looking for last minute holiday deals.
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Old Apr 29, 10, 3:38 am   #11
 
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I'd say most people who buy tix at the last minute are the ones who HAVE to fly at that time. Because these people have to fly they will pay whatever it takes.

And I bet theres more than 1 person who has to pay $1200 for every 6 people to pay $200.
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Old Apr 29, 10, 4:41 am   #12
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It seems to me that classical economic market logic invalidates the above arguments....

And it would seem that the reality of how airlines operate would invalidate your assumptions.
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Old Apr 29, 10, 5:03 am   #13
 
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A very interesting discussion--and one that may never be resolved.

IMHO, the current airline pricing model of, really ripping off certain passengers who must fly on short notice is economically unproductive overall.

While it may maximize airline profits the toll on society overall is great. Airlines are, or should be, more like a regulated utility. One price fits all. I don't pay more for electricity when really, really need the power to go on FT as opposed to when I just sorta need it to watch Dancing with Bears or whatever.

For that matter I don't pay more for gas if I have to buy it right now because the tank is empty.

Airline pricing as it is now is just another example of charge the poor, uneducated, those you can screw because they need it right now, those who don't belong to the frequent buyers club, a lot more which has a lot of frictional, social costs which the airlines pass of to us all. Think of the productive uses all the time spent trying to get a decent fare could be put to.

In any event, the current airline pricing setup isn't workng very well. Almost all of the airlines teeter on the brink of going under.

I am no fan of the somewhat fixed pricing we used to have, but we did used to have legroom, clean, new, planes and even (imagine that) hot meals.
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Old Apr 29, 10, 5:31 am   #14
 
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Originally Posted by biggestbopper View Post
While it may maximize airline profits the toll on society overall is great. Airlines are, or should be, more like a regulated utility. One price fits all. I don't pay more for electricity when really, really need the power to go on FT as opposed to when I just sorta need it to watch Dancing with Bears or whatever.
Well, at least in my country, a lot of people have electricity tariffs that varies with time-of-day, based on high and low demand, and non-varying electricity tariffs with price depending on contract date.

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Originally Posted by biggestbopper View Post
Airline pricing as it is now is just another example of charge the poor, uneducated, those you can screw because they need it right now, those who don't belong to the frequent buyers club, a lot more which has a lot of frictional, social costs which the airlines pass of to us all.
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(I will not assume any political views on your part based on just a forum post, so please don't take this as directed personally to you, but: As of lately, I find myself, born and raised and living in a European country viewed by the rest of the world as at least "semi-socialistic", wonder more and more frequently why I hear US citizens screaming for silly market regulations. Absurd.)

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I am no fan of the somewhat fixed pricing we used to have, but we did used to have legroom, clean, new, planes and even (imagine that) hot meals.
And less bargain fares/no LCCs.
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Old Apr 29, 10, 6:19 am   #15
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Actually the issue is resolved.

The airlines no longer do it (with the exception of places like lastminute.com and weekend specials) because their data and experience is they will make more money by not selling discounted seats at the last minute.

I think that pretty much went away around the same time they all stopped issuing refunds if the rate dropped on a purchased ticket without the huge change fees they have now.

The airlines know within a seat or two usually how full any given flight will be and what each of those people will be willing to pay. Their pricing models are constantly repricing based on what was already sold.

Unlike a cruise people traveling last minute are not usually going to do so as an optional trip (well some are, but certainly not the bulk of the last minute bookers, business people). And many cruise lines will also honor price drops after you book your ticket, so it pretty much takes away the entire book now or wait for the price to drop gambles.

They also save on fuel, gate time, boarding time and all that if they have a few empty seats. I'm sure they have done the math and know which way at the end of the day nets them the most for that flight.
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