Originally Posted by
sxf24
IUS airlines continue to state that the revenue environment remains very strong and that elasticity of demand is zero at this point. That means every passenger that leaves because they're dissatisfied with the price/value can be replaced with another passenger who is likely willing to pay an equal or higher fare.
Well put.
Originally Posted by
hazelrah
This doesn't make any sense. There are customers waiting in the wings to take elites place?
There are many, many more infrequent or less frequent travelers than very frequent travelers in the real world. Certain elite heavy routes and times of day notwithstanding, DL could more easily afford to lose tomorrow the absolute volume of all its diamond /platinum elites than it could to lose that of all the rest of its potential passenger customers.
An airplane seat doesn't know the difference between being sat in by an elite or a kettle. It is either filled or it isn't. When DL and other airlines can, through their market power resulting from anti-competitive industry concentration, monopolize local markets, control capacity and increasingly set prices, then the airplanes will be filled with or without elites. And many people will be forced (by lack of choice, demand for convenience, organisation policy, pricing power, etc.) to fly DL/Skyteam, whether or not DL offers a Skymiles program with elite benefits.
For those increasing numbers of markets where for many passengers DL and her partners are the only (or only practicable, i.e. right schedule, right connections, etc.) game in town, DL almost has a guaranteed annuity as long as their units of production (=oil) let them price tickets to be affordable to most people who need/want to travel.
In addition, increasingly, revenue yield is not just a function of fare class but also of fees. Increasing the number of kettles on a given flight and decreasing the number of corporate contract, discounted, fee-waived, elite-benefit-burning elites can actually give a substantial goose to marginal profits.
It is much easier to set up the overall market game so that competition becomes more and more an illusion than it is to kill yourself in eternal prisoner's dilemma games and wind up having to give away the store for nothing with unsustainable pyramid schemes such as Skymiles. Delta is smart enough to maximize their take to the very end and to let Skymiles collapse of its own weight of impossible to redeem economically volumes of miles -- a significant portion of which DL was paid for in hard cash through AMEX. Those with lots of banked miles and the expectation of lots of free upgrades during the coming year or two are going to find out instead that DL Madoff with their dreams.