Is AC profiteering?

Old May 20, 11, 6:15 am
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Is AC profiteering?

In another thread it was shown AC raises prices dramatically for end of June. (“the jump was significant in terms of the base fare ... from $859.00 to all of a sudden $1259-$1640.00”). It was justified by stating “Because the demand during those last 2 weeks is a big jump as well? Schools year finish, lots of kids going back home etc? Last 2 weeks of Jun is high season for HKG (Jun 22 - Jul 1). Fares don't stay there same year round.”

So they raised the price not because of some business cost factor, but because they could gouge the customer because of increased demand of kids wanting to home after the school year.. So would AC raise the price of water and food before a hurricane? The cost of sandbags when the demand increases before a flood? Maybe those are too emergency-related examples. How about more predicable and annual. Does Toys R Us raise prices of toys before Christmas? Does Zellers raise prices of school supplies before September? Do restaurants raise their prices for Mothers Day? Does Shoppers Drug Mart raise the price of flu medicines before the flu season?

Profiteering is “to make an unreasonable profit not justified by cost or risk” (Wiki). So there is no increased costs or risk for end of June just an increased demand by students wanting to go home. Is AC profiteering?
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Old May 20, 11, 6:21 am
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pretty much anything in travel is based on seasonality....be it from air to hotel to car rentals. Days of the week is also a factor. ie In Vegas hotels are more expensive on Fridays and Saturdays than any other day of the week.
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Old May 20, 11, 6:27 am
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Since airplanes began to carry passengers, there have been high and low seasons which correspond with travel patterns and vacation periods. For Europe and Asia, the high season runs through the Northern Hemisphere summer (and vice versa in the Southern Hemisphere). For the Caribbean/Mexico and south, the high season has been the winter. There is nothing wrong with a company/industry attempting to extract the maximum dollar from a scarce product when demand is highest. If you want to travel when others also want to travel, and there are a limited number of seats on sale, then you should be prepared to pay a premium. If a kid, as you put it, (or his parents) can afford to go to school in Canada, they can afford the air fare to get back home. S/he doesn't need AC (or CX) to subsidize his or her return travel!

I think it is wrong to base your perception on the trough instead of the peak. Your $900 fare is based on a period of low demand and surplus inventory, and thus the fare is indeed lower. But the norm is closer to a midway point between the high fare of $1500 and the lower fare...likely in the $1200 to $1300 range. (My sweet point is about $1000 a/i for destinations in China and I have flexibility in when I want to travel there.)

It's not that you can't get to HKG by any other means. There are two nonstop carriers offering a half dozen flights a day from Canada, and dozens of other carriers that will get you there with a single connection, so competition is also a factor in pricing but there are competing demands too on the competition.

Last edited by Shareholder; May 20, 11 at 6:35 am
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Old May 20, 11, 6:33 am
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Originally Posted by Shareholder View Post
There is nothing wrong with a company/industry attempting to extract the maximum dollar from a scarce product when demand is highest.
Well, no, demand for water and food is highest before a hurricane yet it is quite wrong for a company/industry to extract maximum dollar then.

And a 2 week period when students return to China is scarcely a “season”... it is a surge in demand on a specific route being profiteered by AC?

Last edited by bingocallerb22; May 20, 11 at 7:06 am
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Old May 20, 11, 7:22 am
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Originally Posted by bingocallerb22 View Post
Well, no, demand for water and food is highest before a hurricane yet it is quite wrong for a company/industry to extract maximum dollar then.

And a 2 week period when students return to China is scarcely a “season”... it is a surge in demand on a specific route being profiteered by AC?
It is supply and demand. If you have a problem with the prices change airlines or stay in Canada for 2 weeks longer. Otherwise go south young man to the land of true competition and use a US carrier. No one said you have to use AC or go out of Canada, find a cheap fare to LA or SFO and then go home.
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Old May 20, 11, 7:52 am
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Profit is not a word in AC's vocabulary.

You can't blame them for trying to get a decent return. Air travel is obviously way too cheap. Proof....just look at all the airlines in North America hemorrahaging money.
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Old May 20, 11, 8:22 am
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Originally Posted by bingocallerb22 View Post
Profiteering is “to make an unreasonable profit not justified by cost or risk” (Wiki). So there is no increased costs or risk for end of June just an increased demand by students wanting to go home. Is AC profiteering?
No, the definition of profiteering is to make a profit by methods considered unethical and adjusting prices to match supply & demand cycles is hardly that. I'm guessing you've never bought flowers on Valentine's Day at double or triple the price to be had only a few days later. There are many other examples of the same market forces at work but IMHO it's hyperbole to call it profiteering.
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Old May 20, 11, 9:10 am
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Originally Posted by tcook052 View Post
No, the definition of profiteering is to make a profit by methods considered unethical and adjusting prices to match supply & demand cycles is hardly that. I'm guessing you've never bought flowers on Valentine's Day at double or triple the price to be had only a few days later. There are many other examples of the same market forces at work but IMHO it's hyperbole to call it profiteering.
Tcook, of course you know your definition differs from Wiki, you might want to go there and correct them, it is an open dictionary. You definition sounds more like price gouging, illegal in may places. Don't think AC is doing anything illegal so I chose the softer word profiteering instead of price gouging. But not matter to me, any word will do. And yes, raising prices of roses for Valentines IMHO is profiteering (or whatever word you want)... two wrongs don't make a right. Profiteering exists, so I guess the question is where does profiteering begin in a normal supply and demand equation? Raising food and water prices before a hurricane is clearly wrong, maybe raising prices on one select route for a two week period because students want to get home might be also.

But I've said enough, sorry, I'll keep quiet and let others have their say. Cheers.
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Old May 20, 11, 9:27 am
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I'm with tcook on this. Flowers on Feb 14 are many times more expensive than they are on Feb 15. Little chocolate bars are generally cheaper on Nov 1 then on Oct 31.

In a Capitalist society it's not uncommon to see prices fluctuate and sometimes "adjust" upwards by orders of magnitude just because of perceived demand. OTOH, it's quite common to see prices held steady just because that's what consumers expect. The price of an iPad for example never changes. And as pointed out, prices for toys before Xmas don't seem to increase.

There are elements of AC's business practice that I do think come close to profiteering (fuel surcharge) but on the whole I believe that what AC is doing is not illegal nor is it necessarily immoral. It is certainly opportunistic, but again that's the nature of the Capitalist society we live in.
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Old May 20, 11, 9:40 am
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Profiteering implies AC is profitable, have you seen there financial statements? They ain't Rollin in cash.
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Old May 20, 11, 9:44 am
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Originally Posted by bingocallerb22 View Post
Tcook, of course you know your definition differs from Wiki, you might want to go there and correct them, it is an open dictionary. You definition sounds more like price gouging, illegal in may places. Don't think AC is doing anything illegal so I chose the softer word profiteering instead of price gouging. But not matter to me, any word will do. And yes, raising prices of roses for Valentines IMHO is profiteering (or whatever word you want)... two wrongs don't make a right. Profiteering exists, so I guess the question is where does profiteering begin in a normal supply and demand equation? Raising food and water prices before a hurricane is clearly wrong, maybe raising prices on one select route for a two week period because students want to get home might be also.

But I've said enough, sorry, I'll keep quiet and let others have their say. Cheers.
The definition I gave was taken directly from Wiki so no need for corrections:

http://en.wikipedia.org/wiki/Profiteering_(business)

Profiteering is a pejorative term for the act of making a profit by methods considered unethical.

To me my view of profiteering making money off someone else's misfortune and this case doesn't even approach that in any way shape or form as the laws of supply and demand and relative value are nothing new and are used by all of us everyday whether we like it or not.

The difference between profiteering and profits in a supply & demand equation is choice; consumers can't chose not to live without food & water after a natural disaster but flyers are always free not to fly if the price is too high for their liking.

Last edited by tcook052; May 20, 11 at 10:01 am
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Old May 20, 11, 10:04 am
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Originally Posted by bingocallerb22 View Post

Profiteering is “to make an unreasonable profit not justified by cost or risk” (Wiki). So there is no increased costs or risk for end of June just an increased demand by students wanting to go home. Is AC profiteering?
The answer is yes.

But not for the reasons you outline

(And as another poster pointed out, they're not even particularly good at it if you go back to the root of the word and look for PROFIT.
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Old May 20, 11, 10:06 am
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The OP is making a classic error in assuming that suppliers of goods should use a "cost plus" methodology in determining the price at which they would sell a product. That simply is not how companies who are "good" at pricing do things. The price gets established by the marketplace - simple supply and demand.

AC and other airlines know that there will be high demand at the end of June to HKG due to returning students, so they raise the price. That does two things:
It allows them to earn more money on the route at that time, which will make up for the losses they incur with emptier planes with lower average revenue per seat flown at times of low demand and given that there is likely more demand than supply at that time.
The more price sensitive travellers will leave early or late to avoid the higher fare, freeing up seats for those people who value their travel dates more highly - spreading out demand.

Note: the same thing happens for travel anywhere at Christmas and in North america during the summer.

I don't cconsider this type of behaviour to be "profiteering" or "price gouging".
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Old May 20, 11, 10:08 am
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Originally Posted by bingocallerb22 View Post
So they raised the price
Airlines do not "raise" prices, they have Full (AKA Normal) Fares that are applicable at any time ($11 000 in Economy on the YTO-HKG route) and then they provide variable-level discounts off those Fares (with discounted Fares ranging from ~$1 000 to $6 000):

[KVS Availability Tool 6.1.5/Diamond - Sabre: Fares/TVN/CA-STD]
Code:
YTO  Toronto Metro ON CA = YYZ YTZ YBZ
HKG  Hong Kong Intl HK [VHHH]
R/T  May 2011 - Apr 2012

Carrier    From    To    Fare      Cur   AdvanceP  Min  Max  Fare Basis/TD | Travel Period
---------  ------  ----  --------  ----  --------  ---  ---  -----------------------------
AC         YTO     HKG      1035   USD        ***        6M  SLCG
AC         YTO     HKG      1153   USD        ***        6M  WLCG
AC         YTO     HKG      1189   USD        ***        6M  SKCG
AC         YTO     HKG      1256   USD        ***        6M  VLXCG
AC         YTO     HKG      1307   USD        ***        6M  WKCG
AC         YTO     HKG      1318   USD        ***        6M  VLWCG
AC         YTO     HKG      1379   USD        ***       12M  QLXCG
AC         YTO     HKG      1410   USD        ***        6M  VKXCG
AC         YTO     HKG      1461   USD        ***       12M  QLWCG
AC         YTO     HKG      1472   USD        ***        6M  VKWCG
AC         YTO     HKG      1533   USD        ***       12M  QKXCG
AC         YTO     HKG      1533   USD        ***       12M  HLXCG
AC         YTO     HKG      1549   USD        ***        6M  SHCG
AC         YTO     HKG      1575   USD        ***        6M  WLXASIA
AC         YTO     HKG      1615   USD        ***       12M  QKWCG
AC         YTO     HKG      1615   USD        ***       12M  HLWCG
AC         YTO     HKG      1667   USD        ***        6M  WHCG
AC         YTO     HKG      1670   USD        ***        6M  VLXASIA
AC         YTO     HKG      1678   USD        ***        6M  WLWASIA
AC         YTO     HKG      1687   USD        ***       12M  HKXCG
AC         YTO     HKG      1732   USD        ***        6M  WKXASIA
AC         YTO     HKG      1769   USD        ***        6M  VHXCG
AC         YTO     HKG      1769   USD        ***       12M  HKWCG
AC         YTO     HKG      1772   USD        ***        6M  VLWASIA
AC         YTO     HKG      1790   USD        ***       12M  ULXCG
AC         YTO     HKG      1822   USD        ***        6M  SHXCGT
AC         YTO     HKG      1827   USD        ***        6M  VKXASIA
AC         YTO     HKG      1831   USD        ***        6M  VHWCG
AC         YTO     HKG      1835   USD        ***        6M  WKWASIA
AC         YTO     HKG      1847   USD        ***        6M  QLXASIA
AC         YTO     HKG      1892   USD        ***       12M  ULWCG
AC         YTO     HKG      1892   USD        ***       12M  QHXCG
AC         YTO     HKG      1924   USD        ***        6M  SHWCGT
AC         YTO     HKG      1929   USD        ***        6M  VKWASIA
AC         YTO     HKG      1944   USD        ***       12M  UKXCG
AC         YTO     HKG      1950   USD        ***        6M  QLWASIA
[..]

[KVS Availability Tool 6.1.5/Diamond - Sabre: Fares/DotRes/US]
Code:
YTO  Toronto Metro ON CA = YYZ YTZ YBZ
HKG  Hong Kong Intl HK [VHHH]
R/T  01 Jun 2011 | 15 Jun 2011 | Economy

Carrier    From    To    Fare      Cur                      Fare Basis/TD
---------  ------  ----  --------  ----  --------  ---  --  -------------
AC         YTO     HKG      1990   USD                      QKXASIA
AC         YTO     HKG      2402   USD                      MKXCG
AC         YTO     HKG      2452   USD                      HKXASIA
AC         YTO     HKG      6629   USD                      BXCG
AC         YTO     HKG      6856   USD                      YXCG
AC         YTO     HKG     11100   USD                      YFFEO
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Old May 20, 11, 10:12 am
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There is no such thing as gouging or profiteering !!

Long version:

Raising prices on necessities like food water and gasoline after a hurricane or other disaster may be called price gouging by you and others.

However, I submit that it is a rational response to scarce goods.

DURING A DISASTER:
Hotel rooms SHOULD be increased in price as much as it takes to maximize revenue for the innkeeper.

This also is best for the society. It forces people to choose:

-should they share rooms with another couple/family?
-should they make alternate plans?
-it keeps hotel rooms AVAILABLE

Gas prices SHOULD be outrageous:

-it forces those with gas not to stockpile unnecessarily
-it forces everyone to economize

Food prices SHOULD be outrageous for the same reasons.

Calling it profiteering and greedy and gouging is absurd and only leads to SHORTAGES and more scarcity.

The free market allocates goods better than SOCIALISM.

Greed is GOOD.

So obviously I believe that:

Similarly, airlines SHOULD be greedy and raise prices to whatever they think will maximize revenue. If they raise too high and anger enough people like you, then people won't fly them as much.

ECONOMICS 101.

I love Canada by the way. Just way too far to the left for me politically (Ontario is my reference).
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