Twalives From United States of America, joined May 2001, 175 posts, RR: 6 Posted (11 years 8 months 3 weeks 4 days 16 hours ago) and read 1425 times:
I was hoping someone could enlighten me on why the following fairly common pricing structure for the mainlines is currently in place.
I live in STL. I am trying to get to RSW. If I fly direct STL-RSW the price is $550 RT for the Thanksgiving holiday. However, if I fly STL-ORD-MIA-RSW (same dates), the cost of the ticket drops to $430 RT. This price difference is not the result a one-week fare drop...cost differentials along these lines are found daily.
Realizing the operational cost-efficiencies that do come into play with a hub-spoke network, I still find it difficult to fathom that it actually costs AA less for me to fly aboard four unnecessary flights (round-trip) some 1000 miles out of my way. Am I crazy?
How do "traditional" mainlines believe they will be able to compete with point-to-point airlines long-term if this issue is not addressed?
174385 From Vanuatu, joined May 2004, 3 posts, RR: 0
Reply 1, posted (11 years 8 months 3 weeks 4 days 14 hours ago) and read 1392 times:
No, you're not crazy. You'd only be crazy if you COULD figure out airline pricing.
However, some economics of a mainline carrier....
The airline (whichever it may be) doesn't charge you what it actually costs them to fly you on any given route. They charge you what they think you will be willing to pay. Some passengers are willing to pay more for a non-stop flight, some aren't.
Certain airports in certain cities carry a premium also. DFW-LGA is sometimes a much cheaper option than DFW-JFK. The fuel burn is almost the same, the landing fee is only slightly higher at JFK for a given aircraft type but the fare can be significantly higher into JFK.
Certain ports of entry on international routes also carry a premium. London Gatwick (LGW) to Raleigh/Durham on AA is a good deal cheaper than London to DFW non-stop. It is usually cheaper to fly LGW-RDU-DFW than LGW-DFW.
How will mainlines compete? Some of the mainlines are beginning to fly 'point-to-point' routes, trying to attract customers with better service (?), better frequent flyer programs, etc, but the simple truth is that in the airline industry price is king. The mainlines will compete by selling their product to match the price of the low cost carriers. Whether any or all of the mainlines will survive in this environment remains to be seen.
In short, if you want to fly from ABC to DEF and there is only one mainline carrier offering a direct flight, you'll pay a premium for that flight or you'll fly all over the country to get there. As soon as LowCostAir competes with the mainline on that route you'll pay LowCostAirs price on any carrier offering the service.
UAL747DEN From United States of America, joined Dec 2003, 2392 posts, RR: 11
Reply 3, posted (11 years 8 months 3 weeks 4 days 12 hours ago) and read 1356 times:
The reason its less to do it with the stops is because those flights are more available. The computer prices each leg. When being priced out it does not know or care how much the non stop price is. For example the STL to ORD would be one price + ORD - MIA + MIA RSW = Your price. Now of course the STL-ORD is going to be cheap because your flying to the hub, then the ORD-MIA is going to be real cheap because your flying between to major hubs then MIA-RSW is only a 30 min flight so they cant charge to much for that! Pricing is always going to be based on availability. If the MIA-RSW leg was filling up fast, the price would change and it might be cheaper to go direct. We will never completely understand pricing but that might help!
Twalives From United States of America, joined May 2001, 175 posts, RR: 6
Reply 4, posted (11 years 8 months 3 weeks 4 days 12 hours ago) and read 1349 times:
Thanks all for the great information. I definitely agree with everything that's been stated.
However, this doesn't answer my question...how will the "traditional" mainline carriers ever compete with point-to-point carriers? Point-to-point is a much leaner price model.
It doesn't make fiscal sense to force an individual to fill 4 additional segment seats when that person could go direct. The airline is giving up 4 revenue producing seats on one person's trip. When it comes down to it, a large portion of each flight's costs are fixed and giving up that revenue is just plain crazy!