Originally Posted by
airzim
Unfortunately that's not a fair comparison Comparing gas stations are a better analogy. The consumer has spoken, and the consumer has determined that an airline seat is an airline seat. It's a commodity, like gas. Exxon, Mobile, Shell, I don't care. Whichever is cheapest.
Utter rubbish. Airline seats are only commodities because the managers of the airlines have encouraged us to think of them in that way.
The gas analogy breaks down very quickly anyway - gas is measureable and conforms to published quality standards an is interchangeable. Airline seats are not - one reason I don't use JetBlue much to the West Coast is because the scheduling is lousy. There are also perceptions of quality. It's the role of the managers to build on those, not keep filling us with the lowest price fallacy, which may only applies to a small sub-set of infrequent travellers.
Originally Posted by
airzim
The other factor is price transparency. The web has made pricing distribution impossible to control. When you go to the grocery store, you can't determine equal price comparison between two varieties of Raisin Bran unless it is sitting on the self next to each other. Then I agree human psychology will pick based on perceived value (Kellogg's is better than Safeway's brand). If you knew that the Kroger down the street sold raisin bran for $1 cheaper maybe you'd make a different decision, but you can't know when you're standing in the grocery aisle. Every possible seat on every possible competitor is displayed at the exact same time in front of you ranked by price on a web page. If the consumer has determined that a seat is a seat irrespective of brand, they pick the lowest fare. If they determine that movies, food, first class upgrades, exit row seating, is important to their decision then they'll take that into consideration. However, if you're logging into Orbitz, there's no way to tell the difference between you (the loyal FF) or John Q Public traveling once a year. Access is equal to everyone.
Airlines try to raise fares all the time, and they get killed when their competitors don't match. They run endless math models to determine the perfect revenue maximization, but again mostly dictated on what happens to the market, which they have little control over.
You've really got stuck on this model. Moses didn't come down the mountain with this model carved in tablets of stone you know.
First, airlines sell seats in at least five ways:
1) they cut significant corporate deals on annual and multi-year basis. These may be discount-sensitive, but they're not driven by comparison shopping in exactly the same way
2) they sell a lot of seats on their own web site, part of which is driven by loyalty, but part also by people flipping between WN, CO, AA etc.
3) some are still sold through travel agents, who don't always offer the cheapest deal, and don't sell WN anyway
4) some probably get close to 10% of their revenue from loyalty schemes, particularly credit cards
5) finally, some seats are sold on sites where price is sensitive, such as Expedia & Orbitz, who also don't sell WN. I don't know what percentage of total revenue this represents but it's not the majority.
So, if the mangers have the revenue tail wagging the dog then, if they're competent, they do something about it, like develop different sales channels.
FWIW I think most of these sites are fundamentally flawed because they don't offer the opportunity to up-sell. Now I come to think of it, despite the number of carriers offering PE products from the US, none of the US sites even offer PE so they're basically an incestuous mess that the US carriers have brought upon themselves and which they just might be wise to junk forthwith.