Originally Posted by
florin
In theory, you're right, and that's an important piece of the puzzle. I just don't know about the amount of seats being displaced out of GFK... it's not like the flights to MSP are packed. In order to have an opportunity cost, you first need to have an
opportunity.
One would also need to take into account, though, what the OP is proposing. Should NW start selling 100 dollar tickets to MSP, which would likely give the same percentage return as the 400 dollar JAX tickets then the planes would be full of O and D traffic between GFK and MSP. This O and D traffic would effectively displace much of the existing connecting traffic. In this example, the percentage return would be the same, i.e. 20% margins, but the 20% margins would be on the 100 dollar fares instead of 400 dollars fare resulting in a net lost of 60 dollars per ticket. You can see, then, that NW's pricing also serves as a deterent to O and D traffic between GFK and MSP, with the thinking that overall it will result in higher yields from the flights.