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On 5/17/2003 12
34 AM FWAAA wrote:
Problem is - would you sell any more last minute fares no matter how low you priced them? In other words, would you gain revenue by lowering full Y and full F or would it cost you revenue.
I think you''d gain revenue - if you took a page from SWA''s book. Lower the last minute fares to something that isn''t highway robbery. REduce the number of fares offered to only about 4 or five. Then get rid of the penalties and change fees. And don''t allow same day standby''s - that''s a change so they pay full one way fare. IMHO, here''s what would happen - some businesses would still book the 21 day advance. In fact, more might go ahaead and book them, knowing that if something changes, they only come up with the fare difference and not a bunch of penalty fees. They do that and the seats available at that rate would fill considerably earlier than they do now...the next fare bucket comes into play. And so on, until the plane is 80% filled with profitable seats rather than 90% filled with loss leading seats. Oh, and those fare buckets - only the lowest bucket should be below cost (actually at cost would be fine) - all the rest will bring in more than it costs you to operate it.
AA (and most of the other majors) still believe that across-the-board fare cuts would decrease revenue, not increase it. I think the jury''s still out on the whether businesses would buy enough of the new lower fares to make up for the smaller price on each one. In my line of work, airfare really doesn''t much matter - if you bill for your time at anywhere from $400 - $600 per hour, clients may not want to pay us for 6 or 8 or 10 hours of travel each way, even if the airfare is reduced from $1,200 to $400.
The majors are looking at across the board cuts as cutting the already discounted fares. I follow a consumer advocates bulletin board and they''ve got folks thinking that they ought to be able to do better than $240 round trip from Jacksonville to Los Angeles. Airtran and Southwest don''t have any fares available at that level. The fares they offer are
double that amount...but Delta does. So does American. Is the butt in the seat worth the loss? Apparently Airtran and Southwest don''t think so, as they seem to be willing to let the other guys fly them at a loss. Will that mean they fly some empty seats? With SWA''s load factor in the mid 60% range, I''d have to say that yes indeed, they will. Why is it I can get on a half full SWA flight that is making a profit, but a full AA flight operates at a loss. AA''s costs are only 3 cents a mile higher than SWA''s, but they are offering a fare that is only bringing in half the amount they need to break even. And it''s all in the name of "market share". And the "big boys" change airfares on an hourly basis - and the "consumer reporters" know it. So you''ve got someone wanting to go across the country and they say "The fare was $240 but now it''s $300 - should I buy now or wait to see if it drops". The answer invariably is "wait". That needs to change. When you run out of $250 seats, the new price is in effect - period.
Besides, with our very generous discount from full Y - we''re already not paying anywhere near the rack rate. Why cut it further?
When clients do demand our presence - we might willingly pay $1,600 or $2,000 - but don''t tell AA that.
I think that when someone can see that the differance between an advance purchase fare and a last minute fare are not huge, they''ll book the flight anyway, and if all the bogus penalties are removed, they''ll feel comfortable in knowing that if they have to change, they won''t get screwed in the process.
The big problem? Air travel is no longer as fast as it used to be, especially for shorter trips. When clients demand a video conference, it really wouldn''t matter if airfare was free that day. We still wouldn''t be flying. And I don''t think that the way to defeat the video conference is with a lower full fare structure. But we are free to disagree.
My sister, who is in telecom, urged her employer to find a better way to do some business. This was because of a $1200 trip to St. Louis at the last minute. Employees at many companies are now very aware of their own companies financial condition, and they are actively looking for ways to cut waste. Not too long ago, they wouldn''t have batted an eye, since their stock options were looking good and the money was rolling in. Now, their stock options are worthless and 60% of their coworkers are gone. They know every penny counts and are taking steps to actively look for ways to cut their own costs.
As far as the video conference or webcast goes - I''m still a bit old fashioned - sometimes a face to face meeting and a handshake might be what''s needed to swing the deal. Then again, while I''m aware of the costs involved in getting there on a moments notice, and in most cases, I am the "client" who is actually paying for the travel, I can understand the desire for a video conference.
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