<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Tango:
Mook: Interesting post. I have read somewhere that the airlines thought they could save on their distribution costs by moving onto the internet. What they did not anticipate was by doing so, they gave up their pricing power. The loss to their pricing power is going to cost them more than their savings in distribution costs.</font>
It's true, and sadly representative of the lack of foresight on the part of airline executives.
When they threw their lot in with consolidators like Expedia (and even helped
found one, Orbitz) which default to strict low-to-high price order when sorting fares,
what did they expect would happen?! Did they think they were somehow immune to the pricing pressure that greater buyer visibility inevitably brings?
What I find interesting is that Southwest has not joined up with any of these engines, preferring to book tickets via the phone and their own web site. And, in many cases (far more than the typical person realizes), their fares on given routes are actually
higher than those of the majors, or at least no more than, say, 10% lower.
Yet a
huge swath of the flying public never ventures further than southwest.com to book leisure fares, figuring that they
must be the lowest-cost alternative! They limit buyer visibility which, combined with good marketing acumen, allows them to charge more. Southwest, as is typical, has taken what has become a negative for the industry and made it into a positive through shrewd business decisions and long-term focus.
Mook