Topic Author
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Joined: Thu Aug 19, 2004 3:24 am

What Is The Sense Of This RE: AZ

Sat Jan 08, 2005 2:14 pm

I was checking fare on Alitalia's website and I came across this nonsense. I can fly these routes (late July with mid-August return):

LHR-MXP-CAI-FCO-LHR (for 324 Euros approx)


MXP-CAI-MXP / FCO-CAI-FCO (for 689 Euros approx)

What is the basis for this? I know about competition and all, but Alitalia offers the lowest fare currently from LHR-CAI, and no other airline can even come close. So why is it so much more if you wanted to originate in Italy? Leaving from LHR you still have to go to Italy to connect, and the fare is double.

The logic of airlines baffles me.
Someday the sun will shine down on me in some faraway place - Mahalia Jackson
Posts: 318
Joined: Tue Jul 13, 2004 8:48 am

RE: What Is The Sense Of This RE: AZ

Sat Jan 08, 2005 2:22 pm

Usually airlines jack up the airfare if you originate in their hub cities, I fly CLT-BDL-CLT on US a ton, its not too cheap.
Topic Author
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Joined: Thu Aug 19, 2004 3:24 am

RE: What Is The Sense Of This RE: AZ

Sat Jan 08, 2005 2:25 pm

Tell me about it. Oddly enough though last summer when we flew from FCO-TUN-FCO Alitalia had rock bottom prices. It was about 170 Euros RT.
Someday the sun will shine down on me in some faraway place - Mahalia Jackson
Posts: 1461
Joined: Thu Nov 20, 2003 7:02 pm

RE: What Is The Sense Of This RE: AZ

Sat Jan 08, 2005 3:25 pm

Simply put, AZ is the only carrier that flies nonstop daily MXP-CAI. To fly to CAI any other way, you have to connect via ZRH/PAR/FRA etc.

From LHR to CAI, there is a great deal more lift, and a great deal more demand. Also, to connect to CAI from LON, there is no backtracking.

Third, the size of the market in MXP-CAI is about 1/100th the size of LHR-CAI in terms of passengers (a guess), so the demand and the capacity is such that there is no need to dramatically discount the fare.

The only time you would see dramatic discounting: Another carrier comes in to MXP-CAI and undercuts AZ pricing. This would only move share, not grow the market, since that market is a business market and VFR market only. Not much vacation traffic ex Italy to Cairo. The vacation traffic goes on the charters directly to the vacation destinations in the south of Egypt.

Since that market is not that elastic, the chances of another carrier going into that market is slim to none. Therefore, the chances of discounting are pretty low.

Remember, the basic laws of supply and demand do apply to airline pricing. The complexities come in when a market is very elastic (can easily grow) and there is competition in the market. When those factors are thrown into the supply and demand equation, then you really start getting complex airfares.

Hope this explanation helps.
David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998
Posts: 2900
Joined: Sun Jun 17, 2001 1:04 am

RE: What Is The Sense Of This RE: AZ

Sun Jan 09, 2005 3:54 am

The logic of airlines baffles me.

What truly baffles me is the "reasoning" behind the following example: When checking on airfare for a PHX-FRA-PHX trip, my first choice was the Lufthansa non-stop flight then operating. At United's website, the same LH flights (the LH-operated non-stop in both directions, therefore no UA-operated flights in the itinerary) on the same dates, priced at nearly USD 200.00 less when compared to how the same itinerary in all respects had priced at the Lufthansa site just moments early. The only difference was at ual.com, the LH flights carried UA* "opb LH" flight numbers. To be sure the huge difference wasn't some coincidence in my timing, I checked it again the next day, with the same result. I even spoke with a UA res agent by phone to inquire whether their much lower fare on flights entirely opb LH was indeed valid -- to which the answer was an affirmative.

The example I've shared is not an isolated example. With the U.S. legacy airlines jumping into bed with each other more and more, it is not uncommon for one airline to market and ticket an intinerary that is operated in its entirety by a partner airline. By whatever convoluted logic, it is not uncommon for a partner airline to offer a lower fare than the operating airline for the same flights and dates -- at significant cost to the operating airline.

By comparison, the huge disparity in AZ pricing LHR-CAI compared to MXP/FCO-CAI is easily understood; although it does lead me to surmise that AZ must have excess capacity to sell on its LHR-MXP/FCO flights inasmuch in the case of their LHR-CAI service through these cities, one would think they are essentially throwing in the CAI connection for free inasmuch as 324 Euros is probably a fairly routine, everyday LHR-MXP/FCO return fare. Why not then sell the seat on to CAI from MXP/FCO to another pax at 324 Euros (or more), which doubles the yield on the two seats flown, at only slightly higher cost? Or do they also have excess capacity MXP/FCO-CAI to fill -- perhaps because O&D pax from MXP/FCO are balking at the fare of 689 Euros return?

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