Supply & Demand - what gives?
Mar 12, 2020, 6:59 pm
#1
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Supply & Demand - what gives?
So we're told that demand for air travel is way down. Flights on many routes are wide open. We know that business travel has been devastated - which really impacts the business class cabin and premium economy internationally. Oil prices are also at a decades low.
Yet: fares from here till May are at an all-time high. What gives? What happened to the supply and demand principle?
I've also noticed (at least on international routes) that the difference between basic and flex is ridiculous, sometimes a 1k or more!
Sometimes flex is almost the same as premium economy........?
I am puzzled, anyone have any ideas as to why?
Yet: fares from here till May are at an all-time high. What gives? What happened to the supply and demand principle?
I've also noticed (at least on international routes) that the difference between basic and flex is ridiculous, sometimes a 1k or more!
Sometimes flex is almost the same as premium economy........?
I am puzzled, anyone have any ideas as to why?
Mar 12, 2020, 7:21 pm
#3
Moderator, Air Canada; FlyerTalk Evangelist
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The logic is that if you're trying to book travel now, you must really need to go. It's not just AC, it's all sorts of airlines and hotels.
Mar 12, 2020, 7:22 pm
#4
Join Date: Dec 2002
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Don't confuse the laws of supply and demand with revenue management.
Why lower prices if people aren't going to travel regardless of how cheap the fares.
How many of us would go to FCO if J was $1000, minimum stay is 72 hours, and be subject to a 2 week quarantine on the return?
Why lower prices if people aren't going to travel regardless of how cheap the fares.
How many of us would go to FCO if J was $1000, minimum stay is 72 hours, and be subject to a 2 week quarantine on the return?
Mar 12, 2020, 7:23 pm
#5
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Wonder if, and yes big if, it's a combination of:
- It's way cheaper to cancel an empty flight than one that has any appreciable amount of pax booked on
- The moment travel bans are waived, demand will spike from people that were stuck / holding back and that's when airlines will try to make it back, which could be at any time so no one's committing to anything
Mar 12, 2020, 7:31 pm
#6
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Hold on now. Revenue management and the laws of supply and demand are still very much entwined.
What has happened is that whereas demand is normally fairly related to price (i.e. as prices go down, demand goes up, and vice versa), demand is currently become relatively inelastic, i.e. the demand curve is much flatter (and lower overall).
The rest of your post is an excellent illustration of that flattening of the curve
What has happened is that whereas demand is normally fairly related to price (i.e. as prices go down, demand goes up, and vice versa), demand is currently become relatively inelastic, i.e. the demand curve is much flatter (and lower overall).
The rest of your post is an excellent illustration of that flattening of the curve
Mar 12, 2020, 8:08 pm
#9
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Yes, sorry, I should have been clearer... Flattening the curve relative to the axis (as opposed to sloping at 45° like most basic illustrative supply/demand curves), but much more vertical. Not sure there's a good word for that. Middle of the night for me right now, so I'm not functioning at 100% 
But yes, that wasn't the right word.
Demand isn't perfect inelastic, just substantially more inelastic (or substantially less elastic, however you prefer to think of it) than usual.
But yes, that wasn't the right word.
Last edited by Adam Smith; Mar 12, 2020 at 8:14 pm
Mar 12, 2020, 8:14 pm
#10
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Lol I told him that I would fly out to BC to do a segment run with him if prices dropped significantly. Call me crazy, but I am taking that 0.2% death rate for young people pretty seriously
Mar 12, 2020, 9:01 pm
#11
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marke190 and I were literally saying this the other day...
Lol I told him that I would fly out to BC to do a segment run with him if prices dropped significantly. Call me crazy, but I am taking that 0.2% death rate for young people pretty seriously
Lol I told him that I would fly out to BC to do a segment run with him if prices dropped significantly. Call me crazy, but I am taking that 0.2% death rate for young people pretty seriously
Forget segment runs. Come fly Europe to Australia and back or something.
Mar 12, 2020, 9:11 pm
#12
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You are correct regarding air fares. Hotels are a different story. I just checked rates for LA for the weekend and prices dropped by close to 50% compared to 2 weeks ago. Same for Whistler where prices are also down.
Mar 12, 2020, 10:04 pm
#13
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I’m trying to take advantage of those hotel deals in Whistler lol. Probably be safer on an empty plane and skiing, than in my university lecture hall. Only problem is the near $1000rt price from YXU-YVR in early April.
Mar 12, 2020, 11:13 pm
#14
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Probably not in J though but I'll make my own J with all the empty seats.
Could we make it an inflight mini-do
Mar 13, 2020, 12:57 am
#15
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