4 ms·

But you have a near-full plane of passengers perfectly willing to pay $200 to fly from LAX to SFO - you're throwing away profit from all of them if you cut thei

by jowiar 12y ago

But you have a near-full plane of passengers perfectly willing to pay $200 to fly from LAX to SFO - you're throwing away profit from all of them if you cut their fare because I'm competing for a different set of customers.

pas 12y ago
But, obviously, you have some customers who are not that willing, because they use these little hidden-city hacks. So what's the problem? You try to maintain your profits as everyone else, but before customers/passengers/clients smartened up it was easy, now you have to sue and lobby but eventually you have to directly fight against the rights of your passengers (the FAA exit fee someone proposed). Since airlines are a high barrier to entry market regulatory capture is both likely and a real concern, just as collusion (or an emergent cartel, after all this is a general problem of the business model). So here to answer the question of what's reasonable you'd have to know more about the operating costs and other dynamics of the market. But I wouldn't be surprised if it turns out that simply forgoing that extra profit leads to a healthier market (cheaper fares, more passengers, bigger market altogether) - which is very likely, after all it is already profitable to do the A->B->C route for whatever they offer it, and if they offer it below costs, then that's basically dumping which we know long term likely hurts the market because leads to fewer participants.
- jowiar 12y ago
  Airline economics are a bit complicated. What exactly constitutes "below costs"? Let's say I have a plane flying from A->B that is typically 90% full, and a plane flying from B->C that is typically 90% full. You want to get from A to C. The cost on my end for doing this is already a sunk cost - I can carry you for a very small marginal cost. If someone else is willing to do it for $200, I'll do it for $190 (Hell - I'm willing to go very cheap - maybe even $50), because getting something for those seats is better than getting nothing. What I don't want to do is to let someone else's fare on route A->C cause me to lower the price for people who want to fly from A->B (whose alternative is to pay $250).
- pdabbadabba 12y ago
  > eventually you have to directly fight against the rights of your passengers The airlines have already fought and won this battle. Airlines contracts of carriage already prohibit hidden city ticketing. We should also consider the possibility that the profits from, e.g., an the LAX->SFO->PDX and LAX->SFO routes are not sufficient to cover expenses if you impose the external requirement that the former must always be more expensive than the latter. Maybe, under these constraints, people decide there are better things to invest their money in than setting up these airline routes, or maybe they replace these two routes with a single, direct LAX-PDX route, and nobody gets to fly to SFO.
SilasX 12y ago
True, but there are going to be other carriers on each leg -- presumably, some who don't carry on to the same cities after landing. That should keep there from being significant profits to be had on overcharging so severely for individual legs of the route.

by jowiar 12y ago

pas 12y ago

But, obviously, you have some customers who are not that willing, because they use these little hidden-city hacks. So what's the problem? You try to maintain your profits as everyone else, but before customers/passengers/clients smartened up it was easy, now you have to sue and lobby but eventually you have to directly fight against the rights of your passengers (the FAA exit fee someone proposed). Since airlines are a high barrier to entry market regulatory capture is both likely and a real concern, just as collusion (or an emergent cartel, after all this is a general problem of the business model). So here to answer the question of what's reasonable you'd have to know more about the operating costs and other dynamics of the market. But I wouldn't be surprised if it turns out that simply forgoing that extra profit leads to a healthier market (cheaper fares, more passengers, bigger market altogether) - which is very likely, after all it is already profitable to do the A->B->C route for whatever they offer it, and if they offer it below costs, then that's basically dumping which we know long term likely hurts the market because leads to fewer participants.

jowiar 12y ago
Airline economics are a bit complicated. What exactly constitutes "below costs"? Let's say I have a plane flying from A->B that is typically 90% full, and a plane flying from B->C that is typically 90% full. You want to get from A to C. The cost on my end for doing this is already a sunk cost - I can carry you for a very small marginal cost. If someone else is willing to do it for $200, I'll do it for $190 (Hell - I'm willing to go very cheap - maybe even $50), because getting something for those seats is better than getting nothing. What I don't want to do is to let someone else's fare on route A->C cause me to lower the price for people who want to fly from A->B (whose alternative is to pay $250).
pdabbadabba 12y ago
> eventually you have to directly fight against the rights of your passengers The airlines have already fought and won this battle. Airlines contracts of carriage already prohibit hidden city ticketing. We should also consider the possibility that the profits from, e.g., an the LAX->SFO->PDX and LAX->SFO routes are not sufficient to cover expenses if you impose the external requirement that the former must always be more expensive than the latter. Maybe, under these constraints, people decide there are better things to invest their money in than setting up these airline routes, or maybe they replace these two routes with a single, direct LAX-PDX route, and nobody gets to fly to SFO.

SilasX 12y ago

True, but there are going to be other carriers on each leg -- presumably, some who don't carry on to the same cities after landing. That should keep there from being significant profits to be had on overcharging so severely for individual legs of the route.