I apologise if this is not the appropriate forum for this question, but it seemed the best one. I"m sure you've gone over this before but I'm dying to know...

When you ask someone in the airline industry, they will tell you that advanced booking fares actually "cost" them money and the full fares are to make up for the loss they suffer trying to provide us poor folks with a realistic opportunity to travel.

My theory is that they triple and quadruple the prices up to ridiculously inflated amounts on the assumption that anybody who *has* to leave in less than two weeks (or, someone who doesn't want to stay a Saturday night) must be a business flyer, and not paying for his/her own flight. Thus they feel ethically just in charging some faceless corporation an over-inflated price because they just know the CEO will sign off on it. I think this is taking advantage of people, and I find it hard to believe that a plane full to capacity of "advanced booking" fares is a loss to the company.

What is the truth?

I think it is the most bizarre kind of customer gouging, advantage-taking, we-have-no-choice-other-than-take-a-train policy I have ever heard of in the service sector. Anybody know the truth of the above? And how does the government and consumer agencies get away with this?

Airlines have fare inventories in which they will have a certain number of fares available per flight.
Yes, full fare and first class tickets are great revenue for airlines, however they are associated with very good benefits too. For example, preferred seating which is blocked until just before the flight, some entice with first upgrades, and best of all- freedom. Tickets are fully refundable and have greater flexibility to reroute or change times and dates.

These in turn cost the airline to hold on to these seats that you might otherwise refund on. Also, in the world of sales, if you can create a sense of urgency such as a sale on a 21 day advance ticket, you are in turn "guaranteeing" the airline revenue for that flight. These in turn cost the airline money because you are discounting the price and possibly diluting the product. This is why there is so much confusion over fare structures and the like. In the end, it is all about supply and demand. The airlines will charge the prices they do as long as people are willing to pay for them. Yes, it may hurt business but there are also some safeguards for individual passengers such as emergency situations and bereavement fares.

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"Fly me to the moon and let me earn alot of miles."

Apart from the fact that it is a little difficult to price-gouge in an industry with so much competition, there is the additional fact that if they are gouging they're doing a rather poor job of it.

Bottom line is that virtually all the major airlines have a rather poor, well, bottom line. Their margins are miniscule and their return on assets are very poor. Most of the airlines make so little money they'd almost be better off selling their airplanes and putting the proceeds in a savings account.

It is also a little unfair to blame airlines for taking your money: if the service provided is worth less than what it costs, it is not the airline's fault for taking your money, it is your fault for being willing to pay. At root, claiming you have "no choice" but to pay is no different from stating the benefit is worth the cost.

And if the benefit is worth the cost, why the complaint?

The statement is true. If every economy seat was charged at an advance purchase fare, they would run a loss.

The fair, evenhanded approach of charging one price for every seat on the plane has been tried -- by PeopleExpress, in the '80s -- and it failed utterly. As soon as a competitor offers the same seat to the same place for five bucks less, the war is lost. Bargain-hunters always glom onto the lowest fare, no matter what. That behavior forces airlines to cater to 'em, or die -- and also charge more to people who are less bargain-focused. It's well known how American's sophisticated yield management systems ran People Express, which had a far less advanced IT infrastructure, out of business. That "price-gouging" you see is actually the free market talkin'.

Not always the case of 'Big Business' having to pay these fares...Although most of the time I can book my business travel well in advance, my family's small company (we have 40 or so employees) has to spring for sudden travel here and there, spending $1000 or more for a single roundtrip domestic ticket.

Businesses have the option of taking the flight or not...If I need to be in Los Angeles or New York or Podunk Nebraska tomorrow for a customer who wants to place a $500,000 order in person, I'll sure as heck pay $1000 to get there, or buy him/her a $1500 first class ticket to come see me.

I could take the flight and get the order, or I could choose not to take the flight and not get the order...I guess in my case it has to do with our profit margins--we'd make enough on a big order to justify me going on the sudden trip.

I could also opt for a Saturday night stay...Sometimes I do, sometimes I don't--depends on the city and the price difference. But the airlines know that I don't want to spend an extra night or two sometimes, and when I don't, that's where they make their money...By posting their fares, they ask me what's the value of my staying away from home for an extra day or two.

Besides, if last-minute travel fares weren't higher, there would be no $198 cross-country trips. It's all subsidation. (Although a recent post I recall reading posed the question whom is subsidizing whom) I think the high fares and low fare compliment each other--both would be higher without the other.

[This message has been edited by MBS PremExec (edited 04-13-2001).]

Regarding the People Express reference ... I always thought it was the Frontier purchase that killed PE, but in reality, it was many things, including the Frontier purchase.
http://www.olesen.com/aha/pe.htm

-David


[This message has been edited by LIH Prem (edited 04-13-2001).]

I think people express was going down long before the purchase of Frontier.

The airlines would undoubtedly be in a losing position with an entire flight filled with low-cost, advanced purchase tickets. As previously indicated, they are barely squeezing out a meager profit as it is.

Good responses to the initial post.