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A380 Cost Savings To Passengers  
User currently offlineSolarFlyer22 From US Minor Outlying Islands, joined Nov 2009, 1037 posts, RR: 3
Posted (3 years 4 months 2 weeks 3 days 10 hours ago) and read 4229 times:

So, we have an interesting test case for what impact to consumers the A380 can have when it enters regular service.

The question is, how much will consumers save on a given route once an A380 replaces an existing type?

The details for this case are:
a) Air France is replacing a 772 with a A388 on Washington Dulles to Charles De Gaulle this summer
b) Route is approximately 3,848 miles
Taking 3 samples of tickets prices this is what you get (same week day, rountrip (s)):
Option 1) Early Summer, Off peak, 772 = $ 1,025, Y
Option 2) Mid Summer, Peak, 772 = $1,426, Y
Option 3) Mid Summer, Peak, A388 = $1,284, Y

The price drops exactly 10% ($142 USD) after introduction of the A388 on this route. Is it safe to say that consumers can expect a 10% decrease in ticket prices upon introduction of the big bird, assuming other factors remain constant? Options 2 and 3 were very similar bookings. I feel a little underwhelmed with 10% but I think a 12-14% reduction down the road is feasible. Discuss.

14 replies: All unread, jump to last
 
User currently offlineglbltrvlr From United States of America, joined Oct 2007, 715 posts, RR: 0
Reply 1, posted (3 years 4 months 2 weeks 3 days 10 hours ago) and read 4161 times:

I would argue that the equipment used on any given route has zero impact on the price that a passenger is willing to pay to travel that route. Over the long term, equipment does influence cost, and that in turn affects profit, which in turn affects the price that the airline is willing to sell at.

User currently offlineblueflyer From United States of America, joined Jan 2006, 3964 posts, RR: 2
Reply 2, posted (3 years 4 months 2 weeks 3 days 10 hours ago) and read 4001 times:
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Quoting SolarFlyer22 (Thread starter):
assuming other factors remain constant

Other factors never remain constant. No airline prices their tickets solely on the equipment or number of seats available. Henceforth a comparison assuming other factors remain constants is invalid.

Besides, the same lowest fare of $1,284.00 is available for a June 3 - June 5 roundtrip on the 777. If I am not mistaken, June 6 is the first day the A380 does IAD-CDG.



I've got $h*t to do
User currently offlinePolymerPlane From United States of America, joined May 2006, 991 posts, RR: 3
Reply 3, posted (3 years 4 months 2 weeks 3 days 9 hours ago) and read 3808 times:

Quoting glbltrvlr (Reply 1):
I would argue that the equipment used on any given route has zero impact on the price that a passenger is willing to pay to travel that route.

Unless the airline has a very good way to price discrimate, this isn't really true at all, especially the kinds of equipment change the OP suggest. With 200+ extra seats per flight, you're starting to scrape the lower willingness to pay of your customer, all else equal

Quoting SolarFlyer22 (Thread starter):
Option 2) Mid Summer, Peak, 772 = $1,426, Y
Option 3) Mid Summer, Peak, A388 = $1,284, Y

I was looking at the website, and the price for 772 and A388 is the same, Just different departure times.



One day there will be 100% polymer plane
User currently offlineikramerica From United States of America, joined May 2005, 21499 posts, RR: 60
Reply 4, posted (3 years 4 months 2 weeks 3 days 9 hours ago) and read 3783 times:

No value without dates. You telling us both are the same peak season isn't enough info.

Further, the price that still makes money is the off peak price. The peak price is added profit. So without knowing dates one can look at the decrease in price as possible evidence that the a380 cuts into yields. But it's made up for w volume?

Either way it is possible that early bookers have a discount potential. Or that simply the $1200 tickets are already sold on the 777 day, but because the a380 is larger, there are still those fare buckets available.



Of all the things to worry about... the Wookie has no pants.
User currently offlineSolarFlyer22 From US Minor Outlying Islands, joined Nov 2009, 1037 posts, RR: 3
Reply 5, posted (3 years 4 months 2 weeks 3 days 9 hours ago) and read 3735 times:

Quoting glbltrvlr (Reply 1):
Besides, the same lowest fare of $1,284.00 is available for a June 3 - June 5 roundtrip on the 777. If I am not mistaken, June 6 is the first day the A380 does IAD-CDG.

Well this is debunked. I feel a little jipped. This means the lower CASM the A380 offers hasn't hit prices for an ordinary consumer in this instance. I suppose more seats are available on a nicer, newer plane but thats it on this route. What I was really hoping for would be for the costs to come down for everyone, consumer and airline. Seems like all the cost benefit is just extra cash for the airline, for now.


User currently onlineAeroWesty From United States of America, joined Oct 2004, 20475 posts, RR: 62
Reply 6, posted (3 years 4 months 2 weeks 3 days 9 hours ago) and read 3723 times:

Quoting SolarFlyer22 (Thread starter):
Is it safe to say that consumers can expect a 10% decrease in ticket prices upon introduction of the big bird, assuming other factors remain constant?

We live in an era where simply the frequency of customers checking fares/seat availability for a particular route on a particular day can cause yield management systems to remove lower-priced fare buckets on offer when it detects certain levels of demand, even without seats actually being sold.

But even though pricing models are more sophisticated than ever, airfares will continue to be set by good old fashioned supply and demand, extracting from our pockets the highest amount the market will bear.

The size of an aircraft on any particular route won't cause airfares to unnaturally trend downwards from previous levels unless it has caused too many seats to be unleashed onto the market, without enough demand to fill them. If that causes the product to be sold at less than the cost to provide it, or higher profits can be made by offering those seats in a different market, supply will be adjusted over time to reëstablish economic equilibrium. Airlines are fortunate in that they are able to move this supply around at 600mph.

So no, just the introduction of the A380 onto any route won't cause airfares to decrease except when its capacity is more than the market can normally bear, which will be a short-term rather than long-term effect.

This is Econ 101 stuff.



International Homo of Mystery
User currently offlineSolarFlyer22 From US Minor Outlying Islands, joined Nov 2009, 1037 posts, RR: 3
Reply 7, posted (3 years 4 months 2 weeks 3 days 9 hours ago) and read 3692 times:

Quoting ikramerica (Reply 4):
Either way it is possible that early bookers have a discount potential. Or that simply the $1200 tickets are already sold on the 777 day, but because the a380 is larger, there are still those fare buckets available.

This is actually a good point. The tickets are priced on a curve for many airlines. So, they may sell 200 tickets at $1200 before they move up the curve to the next tier (~$1400) for a A380. A comparable run on the 777 may have only 150 of those tickets before they move up the curve to the higher price level. In that scenario, 50 people just saved $200.


User currently offlineStitch From United States of America, joined Jul 2005, 30854 posts, RR: 86
Reply 8, posted (3 years 4 months 2 weeks 3 days 9 hours ago) and read 3692 times:
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Some A380 operators priced flights operated by the A380 higher than those operated on other aircraft to take advantage of the "wow" factor when the aircraft first entered service, but soon enough the prices started to equalize for as nice a ride the A380 is, it's still just a ride.  

SQ also charged a premium for the 777-300ER when it entered service with their new First Class and Business Class, but those "surcharges" also fell by the wayside after a short time.

All that being said, the A380s are going on the heaviest routes with the most preferred timeslots, so natural demand will impose a bit of a pricing premium based on Revenue Management equations.


User currently offlineadh214 From United States of America, joined Sep 1999, 360 posts, RR: 0
Reply 9, posted (3 years 4 months 2 weeks 3 days 5 hours ago) and read 3272 times:

Airlines price tickets at the highest value possible and still to fill the plane. They do not consider the cost of operating the route in setting prices. Now, they do consider the cost of operating the route and the revenue it brings in to determine if they will continue to operate the route in the future.

This is true of basically any business. If I can sell a shirt for $50, I will. If I can make it for $49, I will do it again tomorrow. If can make it for $51, I won't bother. The cost of production has very little to do with the pricing of products and services. It only impacts the availability of products and services.

Andrew


User currently offlinepylon101 From Russia, joined Feb 2008, 1502 posts, RR: 0
Reply 10, posted (3 years 4 months 2 weeks 2 days 13 hours ago) and read 2610 times:

Quoting Stitch (Reply 8):
Some A380 operators priced flights operated by the A380 higher than those operated on other aircraft to take advantage of the "wow" factor when the aircraft first entered service

This true and easy to prove.
On any given day EK DME-DXB-BKK (or SIN - or any destination where EK has one daily on 388 and one on 773) - it turnes out that fare with A-388 is considerably higher.


User currently offlinesantos From United Kingdom, joined Dec 2007, 740 posts, RR: 0
Reply 11, posted (3 years 4 months 2 weeks 2 days 12 hours ago) and read 2537 times:

I'm always looking at EK website and i found that EK's LHR-DXB flights are more expensive on the A380 than the B777's.

User currently offlineglbltrvlr From United States of America, joined Oct 2007, 715 posts, RR: 0
Reply 12, posted (3 years 4 months 2 weeks 2 days 6 hours ago) and read 2198 times:

Quoting pylon101 (Reply 10):
On any given day EK DME-DXB-BKK (or SIN - or any destination where EK has one daily on 388 and one on 773) - it turns out that fare with A-388 is considerably higher.

Not sure you can attribute that to the aircraft model though. For example, it's possible that EK put the A380 in the slot that has higher demand (makes sense - more demand, bigger aircraft) and puts the smaller aircraft in a less demand slot. So it's the demand that drives the pricing, not the aircraft model.


User currently offlinepar13del From Bahamas, joined Dec 2005, 7115 posts, RR: 8
Reply 13, posted (3 years 4 months 2 weeks 2 days 6 hours ago) and read 2160 times:

If its anything like the fuel surcharge, I expect prices to remain the same or even increase as mentioned for the "wow" factor, any decrease in fares will happen due to competition, not because the A380 has better XXSM, customer are not that fortunate and airlines are not that compasionate.

User currently offlineshankly From United Kingdom, joined Jan 2000, 1541 posts, RR: 1
Reply 14, posted (3 years 4 months 2 weeks 2 days 5 hours ago) and read 2090 times:

Quoting santos (Reply 11):
I'm always looking at EK website and i found that EK's LHR-DXB flights are more expensive on the A380 than the B777's.

Agree. Took the return leg of my last EK LON-DXB-CPT flights back into LGW as when booking it was cheaper than into LHR on EK001. Tried to switch to EK001 at DXB and advised that yes this was poss, but at an additional cost of £350. I stayed with the cheaper 777W into LGW

And yet, have just booked LON-DXB-KUL and cheapest EK fare (including looking at LGW options) had the two A380 legs out of and back into LHR on EK002 and EK003 respectively



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