Originally Posted by
jsloan
....
The logic is straightforward -- you'd rather sell 7 seats at $150 than 10 seats at $100. Ideally, you'd sell 7 seats at $150 and 3 seats at $100, but in practice that's extremely difficult to do, because the passengers who would be willing to pay $150 are still likely to pay $100 when it's offered. Suppose you offer 3 in the lowest fare bucket, and they're snatched up by passengers who would have paid $150. Now, you raise the price to $150, but you only sell four more seats -- 3x$150 + 4x$100 = $900, less than you'd have made if you either started with the higher price or just kept the lower price. So, while you're correct that, in a vacuum, you'd like to sell the available seats at anything over marginal cost, in the marketplace, you can hurt your total revenue by trying to do so.
Incidentally, the shift has been obvious -- UA has mostly stopped offering discount inventory months in advance. It doesn't hurt to check, of course -- I've found a couple of K seats on flights later this year, which I was happy to scoop up -- but you're far more likely to see W inventory or higher than L inventory or lower when you're more than 6 weeks out.
Of course if you make those 3 seats at $100 available on Day 1 then you risk the result you describe... getting slightly less revenue. But that's not what Narcella seemed to be talking about. From the way the story was communicated here, he'd rather sell those 7 seats at $150 and never make those 3 unsold seats available at a lower price that someone else might be willing to pay. This is all probably the fallout of no longer offering non-refundable tickets in the traditional sense. It's too easy to convert those already-sold $150 tickets into $100 tickets.