Saturday, June 21, 2008

Airlines Scheme to Offset Fuel Prices

Some airlines are responding to the higher fuel costs in ways that make no sense to me. I suspect they know exactly the cost of every flight they conduct. The key is to maximize occupancy while maintaining a profitable flight. Fill the seats.

The newest strategy by United is likely to create empty seats. Requiring minimum stays will cause business travelers to purchase tickets in pairs (2 round trip tickets) and then using the first half of one ticket heading to their destination and the first half of the second ticket returning. That means unoccupied seats unless filled with standby passengers. With the discounts they are considering for "required minimum stays" it will often make sense to the business traveler to use this method to circumvent that requirement. It may require using two different airlines to accomplish, but it is doable.

Why not just price the seats at a profitable level based on anticipated usage and be done with it? The airlines have huge databases that provide very reliable traffic flow and seat occupancy statistics. Use them. Don't play games. Instead, the result is likely to be a shift to alternative means of transportation. The private aviation industry may gain more charters.

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