Revenue Management At Its Best

 
Old Jul 14, 08, 6:00 pm
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Revenue Management At Its Best

Go figure - CMH to ATL over $1,000 nonstop. Take 2 stops and the fare drops to less than $500. With fuel prices where they are and capacity being reduced I would not expect to see this disparity. It must cost them more in fuel to fly me to 3 airports than they are charging for the ticket.

I guess I will be traveling a few extra hours and racking up a few extra miles to satisfy the bean counters.
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Old Jul 14, 08, 6:23 pm
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and you wonder why the legacies are losing money left and right.... i've noticed many of these situations where the fares simply defy all logic. ATL-ROA round trip is over $1000, CHS-ATL-ROA-ATL-CHS is less than $500. i'm no economist but that makes no sense to me. people will say its because of competition in various markets, but i say if the other guy is charging $500 and breaking even and i'm charging $500 and losing money, let the other guy have the passenger and save me the weight rather than fly him around just for the sake of losing money
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Old Jul 14, 08, 6:32 pm
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Originally Posted by gte157q View Post
..and you wonder why the legacies are losing money left and right....
Actually, I'm fairly sure this scheme makes them a lot more than it loses.

If the OP flies CMH-ATL, then that's one fewer seat that can be sold CMH-ATL-NRT, for example.

It's the same reason it costs an arm and a leg to go PHL-JFK... because DL would rather I use that as a feeder to a very lucrative international flight.
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Old Jul 14, 08, 7:27 pm
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Originally Posted by newbusflyer View Post
Go figure - CMH to ATL over $1,000 nonstop. Take 2 stops and the fare drops to less than $500. With fuel prices where they are and capacity being reduced I would not expect to see this disparity. It must cost them more in fuel to fly me to 3 airports than they are charging for the ticket.
If everybody is price sensitive and willing to take two stops to save the money, then your analogy is absolutely correct. But, let's say that half the people are willing to take the two extra stops but the other half (primarily those who bill the client for the travel) absolutely need the convenience of the nonstop and are willing to pay whatever it costs.

What you would then lose in ferrying half the people over the extra connection you would pick up in extracting the premium fare for those demanding to take the nonstop. That is particularly true if those who take the extra connection(s) are not taking the last seat on the plane.

This is the sort of issue that revenue management people juggle every day. They're trying to get the most revenue out of every available seat, and in doing so the resulting fares can look very nutty on the surface. And, frankly, sometimes they are wrong and give up good business in the search for even better business.
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Old Jul 14, 08, 7:59 pm
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similar thing on AA

i saw that inside american airlines thing on CNBC, and they talked to rev mgmt guy. he was saying that sometimes a aus-dfw flight might appear sold out, but only on that route, but if you wanted aus-dfw-jfk or something, then you'd be able to book it
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Old Jul 14, 08, 10:00 pm
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Originally Posted by sammy0623 View Post
i saw that inside american airlines thing on CNBC, and they talked to rev mgmt guy. he was saying that sometimes a aus-dfw flight might appear sold out, but only on that route, but if you wanted aus-dfw-jfk or something, then you'd be able to book it
DL do the same thing. Inventory for a particular segment is determined dynamically based on the overall itinerary (journey) being searched for. The system is called Journey Control.
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Old Jul 15, 08, 7:28 am
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I noticed a similar issue on a flight that I have booked in a few weeks. Im flying Lit to LAX with a layover in ATL. I know its a hub system, but it seems rather silly to me to fly coast to coast when you start in the middle of the country. The return trip is even worse (LAX-ATL-CVG-LIT).
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Old Jul 15, 08, 8:22 am
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Originally Posted by CelticFlyer View Post
DL do the same thing. Inventory for a particular segment is determined dynamically based on the overall itinerary (journey) being searched for. The system is called Journey Control.
Or, more commonly in the industry, Origin and Destination Revenue Management. Most of the big carriers now practice this science that allows a carrier to optimize the entire network rather than just on a leg by leg basis.
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Old Jul 15, 08, 8:39 am
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Originally Posted by orlandodlplat View Post
Actually, I'm fairly sure this scheme makes them a lot more than it loses.

If the OP flies CMH-ATL, then that's one fewer seat that can be sold CMH-ATL-NRT, for example.

It's the same reason it costs an arm and a leg to go PHL-JFK... because DL would rather I use that as a feeder to a very lucrative international flight.
But not necessarily. Sometimes the price on the short flight (feeder flight) exceeds the cost on the long itinerary. And the profit is much higher as the long-haul seat can be sold to another purchaser.

It's lucrative only when the empty seat would be taken by someone that's paying a much more profitable thru-fare.

Plenty of times I paid more for SAT-CVG on a K or lower fare than an M or B fare to Europe SAT-CVG-LGW/CDG/etc.
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Old Jul 15, 08, 8:53 am
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Originally Posted by gte157q View Post
and you wonder why the legacies are losing money left and right.... i've noticed many of these situations where the fares simply defy all logic. ATL-ROA round trip is over $1000, CHS-ATL-ROA-ATL-CHS is less than $500. i'm no economist but that makes no sense to me. people will say its because of competition in various markets, but i say if the other guy is charging $500 and breaking even and i'm charging $500 and losing money, let the other guy have the passenger and save me the weight rather than fly him around just for the sake of losing money
Heck, even defining how much it actually costs to fly a passenger is a feat unto itself.
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Old Jul 15, 08, 9:47 am
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Old Jul 15, 08, 11:23 am
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What is the cost out of DAY?
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