Originally Posted by
Boten
Based on Revenue Management theory:
If an airline has 100 seats and only ever sells 75 seats at, on average, £100 then by reducing the number of available seats to 80 does not mean that the market is prepared, on average, to pay £110 for those seats and therefore the prices remain as they were.
However if they reduce the number of seats to 50 then the airline should remove the 25 seats of the lowest fares normally bought in order to optimise revenue.
Therefore I guess it depends on which scenario BA's situation falls into.
Not quite as simple. The airline does not have 100 seats, it has, say 20 seats in J and 80 seats in Y (I'm making it two classes for the sake of simplicity). It could choose to remove, say, 5 seats in J which would be replaced by an extra 10 seats in Y, making the new configuration 15+90.
Now, if the airline knows that there is typically demand for 5 full fare J seats but 30 full fare Y seats, it will have to sell the rest of each cabin at discounted prices, and in the first configuration, it looks like it would have needed to discount J more (75% of seats need to be sold against only 62.5% in Y). With the proposed changes, it would "only" have to discount fares on 2/3 of J seats while bringing the proportion of discounted Y seats to 2/3 as well. This may (or may not) be the optimised revenue model for this route (everything depends on the margin that the airline makes on each seat, for each level of discount in each class of travel).
So in effect, reduction in the size of J cabins probably simply means that BA feel that they could increase their profit by increasing the Y cabin as there is strong demand for it, and answering that demand could be done at levels that are more lucrative than in J at the moment.