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How Profitable Are "cheap" J Class Tickets?  
User currently offlineLH4116 From Sweden, joined Aug 2007, 1714 posts, RR: 18
Posted (5 years 7 months 1 week 13 hours ago) and read 4815 times:

Airlines like LX are now offering Business class upgrade fares for their Y class customers, on European routes. This means that it is possible to purchase a J ticket, for only the double price of a low fare Y ticket.

For example, an Y class ticket normally cost €220, and the J ticket would the cost €440, and a regular fare J ticket would have cost €650.

How profitable is it for airlines to sell out J tickets for a much lower price?


SAS Plus is Business Class made faux!
8 replies: All unread, jump to last
 
User currently offlineAlphaomega From United States of America, joined Aug 2005, 581 posts, RR: 0
Reply 1, posted (5 years 7 months 1 week 13 hours ago) and read 4794 times:

Fill steerage to cover operating costs and then profit off the front end...how an airline does that is up to each business model.

User currently offlineViscount724 From Switzerland, joined Oct 2006, 25871 posts, RR: 22
Reply 2, posted (5 years 7 months 1 week 11 hours ago) and read 4652 times:

LX only offers the business class upgrade surcharges on routes with little full-fare business class demand or on days of the week when business class is almost empty (weekends for example).

The additional cost of the European type of business class using the same seats as Y class (with the middle seat left empty on on most carriers including LX) is very low. The surcharge is much higher than the additional cost.


User currently offlineCOEI2007 From Vanuatu, joined Jan 2007, 1912 posts, RR: 5
Reply 3, posted (5 years 7 months 6 days 16 hours ago) and read 4270 times:

If they can get any extra money out of Y pax, and these seats would have been emtpy, or the J cabin has no full fare J pax, why not?

User currently offlineThegivenone From Austria, joined Jan 2008, 193 posts, RR: 0
Reply 4, posted (5 years 7 months 6 days 14 hours ago) and read 3551 times:

Austrian is also offering J-class deals throughout the summer (on certain days) for €999 return between Vienna and New York, Washington, Toronto and Beijing.

Does it really cost an airline that much to serve a business class passenger? The crew is not getting paid anymore than normal and the seats are not a variable cost. The only significant expenses seem to be the food and "extras" like amenity kits. I guess ground services (lounges etc) would also add to the expenses.


User currently offlineGoldorak From France, joined Sep 2006, 1860 posts, RR: 4
Reply 5, posted (5 years 7 months 6 days 14 hours ago) and read 3517 times:



Quoting Thegivenone (Reply 4):
Does it really cost an airline that much to serve a business class passenger? The crew is not getting paid anymore than normal and the seats are not a variable cost. The only significant expenses seem to be the food and "extras" like amenity kits. I guess ground services (lounges etc) would also add to the expenses.

You seem to forget that a J-class seat takes about 1.5 to 2 times the space of a Y seat, so much less pax carried in J on the same area size compared to Y.


User currently offlineUnitedTristar From , joined Dec 1969, posts, RR:
Reply 6, posted (5 years 7 months 6 days 14 hours ago) and read 3517 times:



Quoting LH4116 (Thread starter):
How profitable is it for airlines to sell out J tickets for a much lower price?

I am sure the J tickets they are selling at that price are capacity controlled, so as to how profitable they are, more profitable then going out empty or with an upgrade.

-m

 airplane 


User currently offlineRunway23 From US Minor Outlying Islands, joined Jan 2005, 2216 posts, RR: 35
Reply 7, posted (5 years 7 months 6 days 14 hours ago) and read 3497 times:



Quoting LH4116 (Thread starter):
For example, an Y class ticket normally cost €220, and the J ticket would the cost €440, and a regular fare J ticket would have cost €650.

How profitable is it for airlines to sell out J tickets for a much lower price?

Very profitable. The additional costs are really not that big - you're talking about a meal, empty seat and lounge access. BA were the first to come up with the idea of paying for upgrades on flights to/from LGW. The program was/is a hit and extended to LHR (albeit at higher prices).


User currently offlineLufthansa From Christmas Island, joined May 1999, 3224 posts, RR: 10
Reply 8, posted (5 years 7 months 6 days 10 hours ago) and read 3118 times:

Okay this is getting into a little bit of a complex number game but basically it comes down to a simple concept. Price discrimination.

The goal on any flight is to extract the maximum possible revenue out of that PAX (note out of that pax not necessarily out of that sector...think international long haul connections to short haul). Traditionally, because business class passengers often book at the last minute, their cabins have had lower load factors.

After seeing how loads could be increased in economy by yield management and proper forecasting, it was shown how if you sold economy tickets cheap that would otherwise remain unsold, you could extract a significant amount of more revenue from the flight. (the key is not to sell to people who would have paid more for the existing price). This is done by making it difficult for people who are willing to pay more for last minute.

For example. If you look at the American Carries discount transatlantic business class offerings...most of them have to be booked a long way in advance. say well over 40 or 50 days and require a weeks stay away. Or they're only for weekend travel at the last minute. Both of these strategies make them unsuitable for a lot of business people, meaning these tickets are purchased by people who would have otherwise just purchased an economy ticket. People who were willing to pay more than just economy, but not full fare business. Remember if they weren't sitting there, they'd be on the same plane anyway, just further up the back and probably only spent half as much.
So if the airline gets say, an additional $1500 over their econony ticket but it only costs them say an additional $150-$200 for upgraded meals and lounge access, then it's in there interests to do it.

KEY POINT: DO NOT DISPLACE PREMIUM REVENUE - can only be sold to people who in general would otherwise not have used the product at full price.


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