PSA and piedmont

[BoilerUP]

The real world does not always play out the way an Economics textbook says it should.

 

[cheapgreek]

Anyone who says US could increase prices and demand would not fall "because it's hilton head" obviously has no economic or business experience.

Its somewhat like the DCA commanding higher fares than IAD and BWI. DCA is in the heart of DC whereas IAD is in Virginia and BWI is in Maryland, both a good distance away from Washington. The fare to HHH can rise slightly and not diminish demand as people will pay a slightly higher fare to fly into their final destination.
We are not talking about walmart and kmart and pricing on everyday goods and flyers do not consider a small fare increase a factor when buying airline tickets, with them, its all about convenience.

 

[cheapgreek]

You are mistaken that they do not. Maybe only one person out of 1000, but the price/yield/revenue relationship is pretty standard among all products with elastic demand.

Its not the same with airline tickets. Buying retail is much different than airline tickets which are not products but a service and flying to ones final destination without landing in another state is worth a small increase in fares, it happens all the time with airports in high value areas.

 

[FMEpilot]

Soooo when are we merging again?

 

[kf4amu]

Its not the same with airline tickets. Buying retail is much different than airline tickets which are not products but a service and flying to ones final destination without landing in another state is worth a small increase in fares, it happens all the time with airports in high value areas.

First, airline tickets are products. They are referred to as products constantly. "We provide a good product" etc.

Second, I agree with your point that the convenience factor will command a higher fare vs another less convenient airport, but that isn't the topic of discussion. The discussion was whether an increase in ticket price from current price level will affect demand. It will, and HHH is not immune from that economic law.

 

[WSurf]

The only thing that doesn't make sense is the idea that customers don't have price sensitivity, especially to a leisure destination like HHH with a much cheaper airport 45 minutes away.

Stop playing amateur economist and go run a business. You'll quickly find out how price sensitive customers are.

It's been like that for years. SAV has always been cheaper then Hilton Head. People want to pay the extra money to fly right too the island! We used to have 14 flights a day from CLT to HHH. Each flight full during the summer. Those people could easily go to SAV and save a couple hundred bucks. But for people with money it isn't worth it.

 

[cbrown1]

well you figure if you rent a car from sav it would cost more than to just fly into to the island and stay there without a car.

 

[cheapgreek]

First, airline tickets are products. They are referred to as products constantly. "We provide a good product" etc.

Second, I agree with your point that the convenience factor will command a higher fare vs another less convenient airport, but that isn't the topic of discussion. The discussion was whether an increase in ticket price from current price level will affect demand. It will, and HHH is not immune from that economic law.

When that phrase is used, " "We provide a good product", that refers to the service provided such as on time performance, convenient schedules, inflight service, frequent flyer programs. etc. When a flight departs with empty seats, no product was lost, but money was lost by not selling a ticket for that flight. Seats are a perishable commodity. Once the plane leaves, they can not be sold.
A small increase in fares will not affect demand for in this case the higher fare results in less ground time in reaching the final destination.
The fact that around 60k per year choose to bypass lower fares at SAV in favor of HHH proves that price will not deter demand. Economics 101 does not apply to the airline business.

 

[kf4amu]

The fact that around 60k per year choose to bypass lower fares at SAV in favor of HHH proves that price will not deter demand. Economics 101 does not apply to the airline business.

Stop comparing SAV to HHH. That's not the topic. The topic is a reduction in demand just to HHH when the price of the ticket increase.

And yes, economics 101 applies to the airline business, even HHH as much as you don't want to believe it.

 

[cheapgreek]

Soooo when are we merging again?

When Piedmont and Allegheny merger some years ago, it made sense since they both flew the same aircraft. With Piedmont flying Dash-8's and PSA flying RJ's, what savings will result? You can't service an RJ in ROA or SBY without doubling up the parts inventory at all the bases.
It might result in a few layoffs at the management level, but aside from that, what savings will make the merger pay off?

 

[cheapgreek]

Stop comparing SAV to HHH. That's not the topic. The topic is a reduction in demand just to HHH when the price of the ticket increase.

And yes, economics 101 applies to the airline business, even HHH as much as you don't want to believe it.

You brought up the SAV-HHH issue. "Hopefully they will never extend the runway. It's a waste of money. SAV is 45 minutes away. If that 45 minute drive is too long, pay up for the convenience."
No one I know would quibble if the flight to HHH was a few dollars more than the flight to SAV in view of getting right to my final destination without adding another leg to my trip via land transfers. I know my handle is cheapgreek, but even I would rather pay a few dollars more to land at HHH. A few dollars more does not phase people but maybe it means a lot to you.

 

[ex j-41]

I am thinking that the deal is kinda like Eagles. Maybe merge the two airlines. Tell the senior people they have a choice. Stay at year 12 pay forever or take the leap to mainline. (Huge pay cut) All junior pilots at the new airline will get a "B" scale pay. In exchange they will be given a flow thru to mainline and get to fly airplanes with hair dryers under the wings.
PSA and Piedmont are in a bit of a different spot than Eagle. Eagle is huge in comparison, PSA and or Piedmont can be shut down like comair fast. The airplanes are owned by US Airways and WellsFargo. They can be put on GoJerks certificate or TSA or Republic or wherever in a hurry.

The only saving grace we have at the regional level is that there are very few pilots in the pipeline for regionals to hire. So if they give the airplanes to Mesa to staff, it may prove very difficult.
At this point a merger wouldn't make any sense. Keep them separate till closing time.

 

[kf4amu]

No one I know would quibble if the flight to HHH was a few dollars more than the flight to SAV

The price increase in question is JUST flying to HHH. We already know its quite a bit more expensive than flying to SAV. Yes people pay a premium for it, but they are price sensitive at a certain level as well, and that 1.50 increase WILL put people over the level they will pay for. Yield management teams at the airline probably know exactly how many, which is why they haven't raised the price 1.50 yet.

 

[FMEpilot]

kf4whatever, your obsession with this is disturbing.

 

[cheapgreek]

The price increase in question is JUST flying to HHH. We already know its quite a bit more expensive than flying to SAV. Yes people pay a premium for it, but they are price sensitive at a certain level as well, and that 1.50 increase WILL put people over the level they will pay for. Yield management teams at the airline probably know exactly how many, which is why they haven't raised the price 1.50 yet.

You do realize that the 3 dollars spoken here refers to the PFC,"passenger facility charge" added to each ticket and collected by the airport, not Usairways don't you? The airlines don't set the PFC rate, the airports do and some are up to $4.50 per ticket and the airlines do not receive any of this money but it is only to be used for airport projects.
And you feel people will forgo the convenience of landing at HHH because of a $1.50? No one I know or have meet over the years would balk at a $1.50 extra on an airline ticket. We are not talking about the Walmart crowd as they take the bus.
If you still don't get the concept, there is little point in continuing the conversation.