Jump in Air Fares?

[pilotyip]

My wife travels to DTW to ABQ on regular basis. Checks fares every week looks for a deal 6-8 weeks out and then buys a ticket. For the last year she has been doing round trip for around $200. She flew NWA, SWA, AAL, and Frontier. Now everyone, except Frontier, has raised their fares to around $400 round trip. Even SWA cheapest ticket through October was $435 RT. Three weeks ago that ticket was around $187. I wonder how this will effect load factors?

 

[Paul R. Smith]

Its probably a result of the load factors.

 

[ualdriver]

My wife travels to DTW to ABQ on regular basis. Checks fares every week looks for a deal 6-8 weeks out and then buys a ticket. For the last year she has been doing round trip for around $200. She flew NWA, SWA, AAL, and Frontier. Now everyone, except Frontier, has raised their fares to around $400 round trip. Even SWA cheapest ticket through October was $435 RT. Three weeks ago that ticket was around $187. I wonder how this will effect load factors?

$400 round trip for a journey of that length sounds pretty reasonable to me. Maybe those airlines are starting to get smart and price their tickets to actually cover their costs!! Maybe my airline will get smart and do that too!

 

[pilotyip]

Consumer view

$400 round trip for a journey of that length sounds pretty reasonable to me. Maybe those airlines are starting to get smart and price their tickets to actually cover their costs!! Maybe my airline will get smart and do that too!

But I am consumer who purchases that product, I only have so much money to spend. I will travel less at higher prices. Fewer passengers, fewer flights, fewer pilots, etc.

 

[filejw]

But I am consumer who purchases that product, I only have so much money to spend. I will travel less at higher prices. Fewer passengers, fewer flights, fewer pilots, etc.

But if the airline doesn't make any money at that 189$ fare they will not be around to carry anybody for long and none of them do on that length of trip at that price.....BTW what companies have done is reduce capacity to create a bit of demand. Kind of like a sold out ball game. I didn't think it would work but it has to a point.

 

[pilotyip]

I agree

But if the airline doesn't make any money at that 189$ fare they will not be around to carry anybody for long and none of them do on that length of trip at that price.....BTW what companies have done is reduce capacity to create a bit of demand. Kind of like a sold out ball game. I didn't think it would work but it has to a point.

But the point is, higher prices = fewer passengers. The cheap fares are the advance purchase fares, purchased by people who don't really have to travel if it is not convenient or economical. I agree the jury is still out on how this will effect load factors. BTW Frontier is still doing the $189 RT DTW-ABQ, so she bought her next ticket for her trip to visit the grandkids in July. If the $189 fare was not available she would not make the trip again until September.

 

[ualdriver]

But I am consumer who purchases that product, I only have so much money to spend. I will travel less at higher prices. Fewer passengers, fewer flights, fewer pilots, etc.

And that's the problem. The consumer (you) has been trained to think that $189 is what it costs to travel across the continent. I doubt that fare from DTW to ABQ is profitable for anyone, advance purchase or not, especially if that fare included taxes and fees which the airline doesn't get. Higher fares will probably be less pilots and airplanes, which I think is already happening/already happened for most airlines. I guess grandma had better get used driving to ABQ or seeing less of her grandkids!

 

[av8tor76]

or use amtrak or greyhound...

 

[pilotyip]

missing the point

And that's the problem. The consumer (you) has been trained to think that $189 is what it costs to travel across the continent. I doubt that fare from DTW to ABQ is profitable for anyone, advance purchase or not, especially if that fare included taxes and fees which the airline doesn't get. Higher fares will probably be less pilots and airplanes, which I think is already happening/already happened for most airlines. I guess grandma had better get used driving to ABQ or seeing less of her grandkids!

I am not the problem, I know the airlines can not cover costs at $189. But to fill 10 seats that would otherwise be empty on Tuesday at 0600 with a $189 fare used to be a good business model. Time will tell if not having that seat filled with a $189 fare makes sense. I think you are also missing the point, it does not matter if grandma drives or elect not to visit as often. The point is she will fly less at higher prices, people flying less will effect load factors. There is cause and effect in every economic action. Will 4 of those 10 seats be filled by a $400 fare to provide the revenue for that flight at 0600 on Tuesday? Things will not remain status quo. I not saying this is right or wrong.

 

[dispatchguy]

I am not the problem, I know the airlines can not cover costs at $189. But to fill 10 seats that would otherwise be empty on Tuesday at 0600 with a $189 fare used to be a good business model.

No, it was a broken bidness model.

You wanna be on my airplane, fine, then pay the fare that is commensurate to the costs incurred in providing the transportation, and a reasonable return on investment.

Other businesses do that, it costs X to create a widget, they price it at X plus a few for profit; thats one helluva-an idea, I think youre on to something there. Price a fare, now follow me here, that PAYS the costs involved.

Wow, thats just friggin brilliant!

 

[ualdriver]

The point is she will fly less at higher prices, people flying less will effect load factors. There is cause and effect in every economic action. Will 4 of those 10 seats be filled by a $400 fare to provide the revenue for that flight at 0600 on Tuesday? Things will not remain status quo. I not saying this is right or wrong.

I think the airlines are starting to realize that (well, at least most airlines except those like Virgin America). It almost seems as if the airlines collectively are starting to come to their senses and realize that $59 fares to grandma's or Disney aren't profitable. So except to compete with airlines like the aforementioned, they're starting to charge fares that actually will make a profit. Further, since they realize that means less people fly, they've stopped irrational growth and/or shrunk their fleets. Heck, even SWA is doing it. So maybe that Tuesday 0600 flight doesn't exist anymore in the future so they don't need to charge cheap fares to fill it. And maybe there are less $189 fares to ABQ and we're starting to see that.

 

[ualdriver]

There is cause and effect in every economic action.

True. Which is why maybe the stores near your wife's house will be happy! Maybe now that she can't find $189 airfares, she'll feel bad for not wanting to spend 100 bucks more to visit her grandkids and instead buys them some toys and mails them to her grandchildren. Then the local store makes money they otherwise would not have made. So does the cargo aircraft that carries the toys to your grandkids. Maybe that store and cargo company need to hire more employees because less guilty grandmas are flying to visit their grandkids and are buying them presents instead. So maybe a cargo pilot flying job at UPS comes open for a furloughee because of increased cargo demand.

 

[pilotyip]

In the end the consumer of your services no matter what business you are in will determine the success of your business.

 

[ualdriver]

In the end the consumer of your services no matter what business you are in will determine the success of your business.

Yup, couldn't agree more. Market forces (i.e. what the consumer demands) are far more powerful than any union or CEO.

 

[dispatchguy]

In the end the consumer of your services no matter what business you are in will determine the success of your business.

That is very true, but if we do not price the product to where we can make a return on investment - then all the consumers dont mean anything if the airline, or the business, ceases to exist.

I mean, should we purposefully price our product to where we are loosing money every time someone sits on a seat?

The airline biz has been doing that long enough; lets hope that carrier managements have pulled their head out and have decided to price their product to where there is a little return on their costs. I mean, if it costs $375 to produce that seat out of ABQ, then what legitimate justification is there to sell it at $189???

You say you have limited resources; fine. But why should I lose $186.00 to put a butt in the seat??? I didnt know that airlines were in the business of charity.

 

[pilotyip]

The unknown

You say you have limited resources; fine. But why should I lose $186.00 to put a butt in the seat??? I didnt know that airlines were in the business of charity.

But what no one knows will there be more empty seats that could have made an additional $189?

 

[ualdriver]

But what no one knows will there be more empty seats that could have made an additional $189?

So what's grandma going to do? Stay home with you or visit the grandkids? We're all wondering.....

 

[pilotyip]

travel less

So what's grandma going to do? Stay home with you or visit the grandkids? We're all wondering.....

go 1/2 as often, we are on a budget.

 

[andyd]

and so are we. we are tired of subsidiing grandma's visit with our paycuts and pensions. i could care less if she see's the grandkids again....if it means that we have 60% load factors and are PROFITABLE. travel is NOT a right, it is a priveledge for those who can afford it WITHOUT my help. rant over....

 

[pilotyip]

Missing the point

we have 60% load factors and are PROFITABLE. travel is NOT a right, it is a priveledge for those who can afford it WITHOUT my help. rant over....

You are missing the point, that 60% LF will be on fewer flights because there will fewer passengers, fewer flights means fewer A/C, fewer capts, and fewer pilots. The question is, will the airlines be better off with an empty seat, or $189 to put a bottom in that empty seat. It my be that smaller airline industry will be more profitable, but who will be the first to give up market share for the good of the industry.