Originally Posted by bocastephen (Post 12908104)

MBAs and 'dissertations' are all fine and good - but not the end-all or even the most accurate source of good strategic thinking.

If MBA and dissertations were always correct, we would never need to ask the customer anything, right? The product would always be perfect and the customer would always buy it.

Originally Posted by airzim (Post 12907089)

Unfortunately that's not a fair comparison Comparing gas stations are a better analogy. The consumer has spoken, and the consumer has determined that an airline seat is an airline seat. It's a commodity, like gas. Exxon, Mobile, Shell, I don't care. Whichever is cheapest.

Originally Posted by airzim (Post 12907089)

The other factor is price transparency. The web has made pricing distribution impossible to control. When you go to the grocery store, you can't determine equal price comparison between two varieties of Raisin Bran unless it is sitting on the self next to each other. Then I agree human psychology will pick based on perceived value (Kellogg's is better than Safeway's brand). If you knew that the Kroger down the street sold raisin bran for $1 cheaper maybe you'd make a different decision, but you can't know when you're standing in the grocery aisle. Every possible seat on every possible competitor is displayed at the exact same time in front of you ranked by price on a web page. If the consumer has determined that a seat is a seat irrespective of brand, they pick the lowest fare. If they determine that movies, food, first class upgrades, exit row seating, is important to their decision then they'll take that into consideration. However, if you're logging into Orbitz, there's no way to tell the difference between you (the loyal FF) or John Q Public traveling once a year. Access is equal to everyone.

Airlines try to raise fares all the time, and they get killed when their competitors don't match. They run endless math models to determine the perfect revenue maximization, but again mostly dictated on what happens to the market, which they have little control over.

Originally Posted by sbm12 (Post 12908129)

The Y/B/M fares are quite likely not being purchased by the folks who are cannot purchase F due to policy but are free to spend as much money as they want otherwise. I doubt that such a policy exists in many companies. I think that it is folks who have policies permitting/requiring refundable tickets, folks who don't have 3-night minimums, fokls buying without much advance purchase or one of the other things that make those fares pop up.

Originally Posted by bernardd (Post 12912626)

Utter rubbish. Airline seats are only commodities because the managers of the airlines have encouraged us to think of them in that way.

The gas analogy breaks down very quickly anyway - gas is measureable and conforms to published quality standards an is interchangeable. Airline seats are not - one reason I don't use JetBlue much to the West Coast is because the scheduling is lousy. There are also perceptions of quality. It's the role of the managers to build on those, not keep filling us with the lowest price fallacy, which may only applies to a small sub-set of infrequent travellers.




You've really got stuck on this model. Moses didn't come down the mountain with this model carved in tablets of stone you know.

First, airlines sell seats in at least five ways:

1) they cut significant corporate deals on annual and multi-year basis. These may be discount-sensitive, but they're not driven by comparison shopping in exactly the same way

2) they sell a lot of seats on their own web site, part of which is driven by loyalty, but part also by people flipping between WN, CO, AA etc.

3) some are still sold through travel agents, who don't always offer the cheapest deal, and don't sell WN anyway

4) some probably get close to 10% of their revenue from loyalty schemes, particularly credit cards

5) finally, some seats are sold on sites where price is sensitive, such as Expedia & Orbitz, who also don't sell WN. I don't know what percentage of total revenue this represents but it's not the majority.


So, if the mangers have the revenue tail wagging the dog then, if they're competent, they do something about it, like develop different sales channels.

FWIW I think most of these sites are fundamentally flawed because they don't offer the opportunity to up-sell. Now I come to think of it, despite the number of carriers offering PE products from the US, none of the US sites even offer PE so they're basically an incestuous mess that the US carriers have brought upon themselves and which they just might be wise to junk forthwith.

Originally Posted by Vermando (Post 12915258)

I agree that TWA Fan, bless him (her?), does conflate his gripes with what's ailing the company - I distinctly remember him blaming allegedly falling employee morale on CO's having cut the benefits it gives to top-tier frequent fliets. :rolleyes: So, I take his rant with a grain of salt. :)

Originally Posted by airzim (Post 12913816)

The facts have been proven, consumers treat airline seats as commodities.

Originally Posted by entropy (Post 12918678)

uhhh WN does sell thru Travel Agents.

Originally Posted by bernardd (Post 12918986)

If you go on believing incorrectly the only airline seat that can be sold is the cheapest, then CO ought to have been re-modelled more than 5 years ago to have a lower cost base than WN, B6, F9 etc. It sounds like you'd better start hoping you're wrong.

Originally Posted by bernardd (Post 12918986)

It is not a FACT that consumers buy air travel only based on price. It may be an important consideration, but it's not the only factor in a purchase. There's a whole spectrum of travellers each with its own weighting of importance, which is not constant. It's the role of an airlines management, including but not exclusively, the sales & marketing operation to focus on the areas in which it can be successful, and possible walk away from those in which it can't.

If you go on believing incorrectly the only airline seat that can be sold is the cheapest, then CO ought to have been re-modelled more than 5 years ago to have a lower cost base than WN, B6, F9 etc. It sounds like you'd better start hoping you're wrong.

Originally Posted by pbarnette (Post 12919118)

I think, perhaps, that you are overstating the case. The issue isn't whether CO can charge a premium, but just how large of a premium, and over how large of a market. I believe that there is a market for a premium service on some routes - SQ seems to do ok at the high end.

BUUUUUUT... just how much provision is there for this premium within the US? What could you possibly offer as a benefit on a 2-hour flight that will generate significant revenue? I can think of almost nothing that could conceivably bring enough consistent revenues over the bulk of CO's network to justify institutionalized higher costs. Because of that, I think that any premium products are best treated as ancillary products (pay-for meals, pay-for extra legroom, etc) rather than bundled into the product.

Originally Posted by autobahnal (Post 12919533)

I'm a latecomer to this discussion, but I've enjoyed getting up-to-speed.

Disclaimer: I've never worked for an airline (though wouldn't mind doing so), though I fly a lot and I conduct research on marketing and human decision-making.

In theory, I like the E+ idea that a bunch of people have mentioned. In reality, I am skeptical of its ability to raise the necessary revenue system-wide, and I'm concerned about the up-front investment costs to re-do all the domestic cabins. But, in the spirit of this idea, would it not be possible for CO to change the front part of the coach cabin to look like (though not be identical to) intra-European business class?

I'm not talking about removing seats and increasing pitch. Instead, I'm talking about very explicitly blocking off middle seats to guarantee that some people have more room. But, not just that--also having the ability to block off middle seats in more/fewer rows depending upon the route and overall demand for seats. This would create a certain variety of domestic E+ experience (more horizontal space, yet equal pitch) without the extensive initial investment, and also with the flexibility to change the size of the E+ cabin as needed for certain routes/times of day. Maybe some routes at certain times of day just get 1 row like this, whereas others get 7.

The key, though, is that they could market an E+ experience, and potentially generate a revenue premium from it, but not incur the large investment costs up-front AND be able to make route-specific adjustments to the size of this "cabin". Unlike with AA's MRTC, it really wouldn't matter as much if there are certain routes for which they know that demand for more room is low.

For me, at least, if I can't get an upgrade, the next best thing is having the seat next to me free in coach.