PHLspecial wrote:usairways85 wrote:Another anecdotal example of high fares at PHL that suppress traffic (especially in economy). I need to fly to LIS in September for work (Mon-Fri)
Why would AA suppress traffic for local people here?
Basic economy supply/demand principles to maximize PRASM. AA is in the business of making money, not throwing capacity around. AA (only only AA) knows what they can charge for PHL based flights to hit their desired number, and they clearly think that the price point in this case while significantly higher than what can be purchased at EWR will allow them to do so....as in it's not too high that seats go empty or are subsequently offered for dirt cheap
Fewer people may jump at a $2,000 coach ticket. So you get 50 people who bite, 15 people who consider alternatives like EWR, and 35 people who opt not to go. If that fare is $1,000...you now may get 65 people who bite, 5 people who consider alternatives, and 30 people who opt not to go. In the first scenario the PHL market as a whole appears a little suppressed because of the people who consider alternatives / don't go. In the second scenario the market appears stronger. There is obviously balance between demand and price.
This is all anecdotal with no empirical hard numbers, but it is a similar scenario that appears to occur regularly. I will gladly drive up to EWR for a $1,000 savings.
aerace wrote:And here in lies the difference when markets have competition. If you look at PHL-DUB since we have both AA and EI, the price is substantially lower. I don't think PHL has enough demand for TP (or any other European airlines really), but clearly if there's a competitive carrier on the same route, it will reconcile the legacies.
Which is odd because EI and AA are not competitors, they have ATI on PHL-DUB. I'm not saying that there are tens of thousands of untapped paxs in the PHL market for many international airlines to enter, but I think there are opportunities.