Crazy Prices...
Jun 7, 2008 | 10:02 pm
#16
Join Date: Jan 2004
Location: DCA
Posts: 3,395
I just hope for the sake of the industry that the current demand curve for travel is as inelastic as they are apparently hoping it is. If, as I suspect, technological increases (videoconferencing, teleconferencing, net-meetings, etc...)has made the demand curve more elastic, this "shrink to survive" strategy is in fact a path to certain death.
Jun 7, 2008 | 11:11 pm
#17
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I just hope for the sake of the industry that the current demand curve for travel is as inelastic as they are apparently hoping it is. If, as I suspect, technological increases (videoconferencing, teleconferencing, net-meetings, etc...)has made the demand curve more elastic, this "shrink to survive" strategy is in fact a path to certain death.
Shrinking works just fine with elastic demand - you increase the price, less people fly, and you keep only the capacity to service the reduced demand at a higher margin.
What's interesting is that a wee bit shy 10% of oil consumption in the US is jet fuel. If there's half as many flights, does that help with the regular gas prices a bit?
Jun 8, 2008 | 12:34 am
#18
Join Date: Jun 2005
Posts: 8,527
The new super-status experience will not be upgrades, but will be the swaggering pride of paying less than $800 or so for a flight, and a new social pecking order in coach based upon who has brought aboard the most elaborate and haute cuisine meal. On Orlando flights this will mean bringing out whole pizzas with white sauce seafood garlic toppings, and spending the entire flight enjoying it. On San Antonio flights this will mean a BBQ smorgasbord of smoked brisket from Coopers in Llano, Muellers in Taylor, Smittys in Lockhart, and City Market in Luling, plus accompanying ribs. On flights from Chicago I think it's hot dogs or something.
Just add a few under-bathed, swarthy software salesmen, several families traveling with half their house as carry on luggage, a live chicken and a pig or two and the only difference between flying in the states and taking the bus or train in the Indian or Colombian countryside is that you are guaranteed a place to sit.
Jun 8, 2008 | 5:54 am
#19
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.....
Last edited by MikeMpls; Jun 8, 2008 at 6:07 am Reason: deleted duplicate
Jun 8, 2008 | 6:06 am
#20
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Eh?
Shrinking works just fine with elastic demand - you increase the price, less people fly, and you keep only the capacity to service the reduced demand at a higher margin.
What's interesting is that a wee bit shy 10% of oil consumption in the US is jet fuel. If there's half as many flights, does that help with the regular gas prices a bit?
Shrinking works just fine with elastic demand - you increase the price, less people fly, and you keep only the capacity to service the reduced demand at a higher margin.
What's interesting is that a wee bit shy 10% of oil consumption in the US is jet fuel. If there's half as many flights, does that help with the regular gas prices a bit?
It won't work in most cars, but cutting Jet A demand should reduce diesel & heating oil costs. To use any of the kerosene-type fuels directly in most diesels requires adding something for lubricity, since most diesel fuel injectors rely on lubrication from the fuel. Jet A & 10-20% biodiesel is a good combination.
More rude slobs eating stinky, messy things on board airplanes. Geez, I can hardly wait.
Just add a few under-bathed, swarthy software salesmen, several families traveling with half their house as carry on luggage, a live chicken and a pig or two and the only difference between flying in the states and taking the bus or train in the Indian or Colombian countryside is that you are guaranteed a place to sit.
Just add a few under-bathed, swarthy software salesmen, several families traveling with half their house as carry on luggage, a live chicken and a pig or two and the only difference between flying in the states and taking the bus or train in the Indian or Colombian countryside is that you are guaranteed a place to sit.
I wouldn't count on a place to sit.
Last edited by MikeMpls; Jun 8, 2008 at 6:32 am
Jun 8, 2008 | 4:40 pm
#21
Join Date: Jan 2004
Location: DCA
Posts: 3,395
Breaking out my Economics major...
Demand is Elastic, increase price, demand falls by more than increase. Thus, you lose money.
Demand is Inelastic, increase price, demand falls by less than increase. Thus, make more money.
Airlines if facing elastic demand curve, reduce supply= increase price, demand falls by more than increase in price=> airlines die.
More info:
http://en.wikipedia.org/wiki/Price_elasticity_of_demand
Demand is Elastic, increase price, demand falls by more than increase. Thus, you lose money.
Demand is Inelastic, increase price, demand falls by less than increase. Thus, make more money.
Airlines if facing elastic demand curve, reduce supply= increase price, demand falls by more than increase in price=> airlines die.
More info:
http://en.wikipedia.org/wiki/Price_elasticity_of_demand
Eh?
Shrinking works just fine with elastic demand - you increase the price, less people fly, and you keep only the capacity to service the reduced demand at a higher margin.
What's interesting is that a wee bit shy 10% of oil consumption in the US is jet fuel. If there's half as many flights, does that help with the regular gas prices a bit?
Shrinking works just fine with elastic demand - you increase the price, less people fly, and you keep only the capacity to service the reduced demand at a higher margin.
What's interesting is that a wee bit shy 10% of oil consumption in the US is jet fuel. If there's half as many flights, does that help with the regular gas prices a bit?
Jun 8, 2008 | 7:16 pm
#22
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Airlines if facing elastic demand curve, reduce supply= increase price, demand falls by more than increase in price=> airlines die.
More info:
http://en.wikipedia.org/wiki/Price_elasticity_of_demand
More info:
http://en.wikipedia.org/wiki/Price_elasticity_of_demand