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?