More Fare Nonsense

[US1YFARE]

Well, the shuttle is a different animal and the lower loads/higher fares may have something to do with having seats available if someone walks up and wants to fly immediately to LGA or DCA or BOS.

But, on other routes, the pricing starts to make less sense.

 

[BoeingBoy]

The key to understanding whether the Shuttle pricing makes sense or not is the elasticity of the market, something I have absolutely no way of knowing.

For example, if the walk-up fare dropped to $200 O/W, would US sell 2 tickets for each 1 they're selling at $300 currently? If so, revenue would increase.

If they could still only sell 50% more walk-up tickets @ $200 than they do @ $300, it's a wash.

Worst case - still selling the same number of walk-up tickets @ $200 as they sold @ $300, revenue drops.

Jim

 

[JS]

Something else to consider is that there are a few connecting passengers on the US Shuttle flights (versus zero on the JetBlue flights). There are still quite a few markets where LGA is the best place to change planes. So, this means fewer seats available for O&D passengers like Art, thus higher fares for an O&D trip.

It's the same reason US rips you off on a CHS-CLT flight -- you're flying to a hub but not changing planes. Although, in that case, most people connect, so the O&D fare is extraordinarily higher. The number of connecting passengers on Shuttle flights is probably not that much, but I thought I would toss out that for consideration.

For example, last weekend I was scheduled to be on a BOS-LGA Shuttle flight to connect to a flight to CHO. That is a far easier connection to make than is PHL. I was kinda looking forward to it because I've never taken the US Shuttle (just Delta), but unfortunately I was in the county jail so I missed the flight.

 

[BoeingBoy]

Something else to consider is that there are a few connecting passengers on the US Shuttle flights (versus zero on the JetBlue flights).

The problem with that argument is that those connecting passengers are often paying a lower fare, to go further, than the O&D passenger. For example, for Sep 20, the current BOS-LGA fare is $304 while the BOS-LGA-PIT fare is $149. If the airline was getting more revenue from the connecting passenger, your argument of setting aside seats for them would make sense.

In an earlier thread, the same pricing issue was true for PIT-HPN vs LAS-PIT-HPN. The passenger connecting in PIT was paying about half what the PIT O&D passenger was, to ride the same airplane on the PIT-HPN segment.

When the revenue is half as much, to carry the connecting passenger more than twice the distance plus the added "handling" cost of the connection, something is screwy as far as the customer is concerned.

Jim

 

[JS]

The problem with that argument is that those connecting passengers are often paying a lower fare, to go further, than the O&D passenger. For example, for Sep 20, the current BOS-LGA fare is $304 while the BOS-LGA-PIT fare is $149. If the airline was getting more revenue from the connecting passenger, your argument of setting aside seats for them would make sense.

In an earlier thread, the same pricing issue was true for PIT-HPN vs LAS-PIT-HPN. The passenger connecting in PIT was paying about half what the PIT O&D passenger was, to ride the same airplane on the PIT-HPN segment.

When the revenue is half as much, to carry the connecting passenger more than twice the distance plus the added "handling" cost of the connection, something is screwy as far as the customer is concerned.

Jim

It's not screwy. It's legacy pricing, where one need to compete only on city pairs with discount carrier competition. I really hope Delta makes it out of bankruptcy, or the idea of a legacy airline charging rational fares in all markets rather than just the ultra-competitive ones will be lost for a long time.

In both your examples, if AirTran were still flying PIT-LGA, there would be no "screwy" pricing. Alas, they are not. JetBlue flies PIT-BOS and both JetBlue and AirTran service LAS/NYC (via whatever stop and NYC airport), so US has to compete on its LAS-PIT-HPN flights and PIT-LGA-BOS flights. Whether someone on the connecting flight first entered that airport or some other airport is irrelevant at that point. The price is based on origin/destination, not flight by flight. The handling cost of a connection is beans.

Of course, the legacy pricing is exactly what attracts discount carrier competition in the first place. When US gouges people, it gives AirTran or Southwest a reason to start service.

 

[BoeingBoy]

It's not screwy. It's legacy pricing...

Many, Art included, would say they're the same - legacy pricing is screwy. Charging high fares to the local O&D traffic so there'll be plenty of seats for lower fare connecting traffic is indeed screwy - unless the O&D demand is totally inelastic (and that's almost never the case).

Jim

 

[jimntx]

To those of you who take the "so fly JetBlue, shut up, and see if we care" attitude...

Perhaps you didn't have to take the drastic paycut that I had to take back in 2003 "so we can compete with the low cost carriers." I care about every single passenger we lose to another carrier simply because that carrier has pricing that makes more sense than ours.

All of us used to stick our noses in the air and comment about the "great unwashed who fly the Greyhound of the skies (SW)." We didn't care that their planes were always full because our passengers didn't have to endure cattle call boarding, no food, etc. Besides, we were a lot more interested in our business travelers who paid full fare for F/C at the last minute because they would never desert us just for a lower fare.

Well, SW now has the highest paid flight attendants in the U.S., and as I understand it, their pilots are the highest paid in the U.S. for comparable equipment. Their planes are still full, and they are still making a profit consistently.

Yeah, I know all about the fact that their profit last quarter was down because their fuel-hedging is coming to an end. Yada, yada, yada. Ask yourself...how many consecutive quarters have they made a profit and compare that to how many consecutive quarters the rest of us have made any profit at all.

If I were you, I would start caring about every single frequent flyer like Art that you lose to any other airline or other mode of transportation for even one trip. One passenger for one trip may not make that much difference, but hundreds of one passenger/one trip losses add up. As Senator Dirksen once said, "A million here. A million there. Before long you're talking about real money."

Oh, and I wouldn't be too dismissive of JB's E190 if I were you. If Art decides he likes it, you may lose him completely except for flights you make to places that no one else flies. And, I would care deeply that people like PineyBob are starting to drive (for crissakes) rather than pay an overblown fare for a short flight. Our fares should always make those FF's think in terms of "my time is more valuable to my company and to my customers than that fare. I'll pay it."

 

[JS]

Many, Art included, would say they're the same - legacy pricing is screwy. Charging high fares to the local O&D traffic so there'll be plenty of seats for lower fare connecting traffic is indeed screwy - unless the O&D demand is totally inelastic (and that's almost never the case).

Jim

You have the cart before the horse. The O&D fares are set high to gouge the customer, which also results in plenty of available seats (higher price ==> lower quantity demanded). On the bright side, if you're going to be gouged, at least the seats are available. I don't think it matters that much, though, because it's pretty rare that discount carrier flights sell out, and legacy carriers also sell out. The excuse of "well we might charge a lot but at least the seats are available for you" is just that, a lame excuse to gouge the customer.

I'm not defending the legacy pricing, just pointing out that the way it works is they set fares as high as possible for every city pair given the market conditions. Low fares actually get fewer seats in the inventory buckets (meaning low fares sell out sooner than full fares). US does not charge high fares for hub O&D traffic to ensure there are seats available for low fare connnecting traffic. There are enough seats for everyone (usually); the problem is that some people are charged an awful lot of money, and that is what attracts discount competition.

 

[BoeingBoy]

You have the cart before the horse.

Me? I didn't write this:

"Something else to consider is that there are a few connecting passengers on the US Shuttle flights (versus zero on the JetBlue flights). There are still quite a few markets where LGA is the best place to change planes. So, this means fewer seats available for O&D passengers like Art, thus higher fares for an O&D trip."

I read that as meaning high O&D fares save seats for connecting passengers. Maybe you meant it differently.....

Jim

 

[JAXPax]

I'd rather sell one ticket at $800 if I can than 8 tickets at $100. Lower variable costs. Less fuel used, less wear & tear on the planes, fewer bags to handle, less beverages consumed, heck, even 7 fewer boarding passes/ticket folders.

 

[WorldTraveler]

I’m not going to get into this discussion too deeply but I will clarify a few things.

1st, JetBlue certainly does carry connecting passengers on JFKBOS. US carries some on their LGA Shuttle but DL has virtually never had connections to/from its LGA Shuttles. Part of DL’s decision is based on the separate LGA terminals but part of its is a belief that the operational integrity of the Shuttle requires a separate, simple operation.

2nd DL uses an all dedicated fleet of MD80s on the Shuttle except for very early flights which do not meet curfew requirements. Those MD80s have no first class seats but have more room for all passengers. US can’t say that. DL obviously knows what it’s doing because it has been the dominant carrier in the LGA Shuttle market from the day it bought it from Pan Am.

3rd. As was alluded to, US is not a low fare or low cost carrier no matter how much they want to say. Their costs are higher than DL’s and there is much more variability in their pricing than either LFCs or DL has. US prices its product the same way it manages its people – gouge where you can.

 

[BoeingBoy]

I'd rather sell one ticket at $800 if I can than 8 tickets at $100. Lower ......

No argument. Selling 2 $100,000 tickets PHL-LGW would be better than selling 200 $1,000 tickets (or selling 400 $500 tickets just to IDB the people that can't get on). But the key is that little "if I can". The legacy pricing model is to charge as much as they can get away with "when they can" - N/S when the competition only offers connections, monopoly markets, etc.

However, even HP demonstrated that having reasonable fares can increase revenue vs the legacy pricing model. And maximizing revenue, as opposed to maximizing ticket prices, is the name of the game.

Jim

 

[FWAAA]

. . . but unfortunately I was in the county jail so I missed the flight.

I hate it when that happens.

WHHHAAAAAAT?!?

Dunno 'bout the rest of you, but as interesting as this discussion of legacy airline pricing models may be, this tidbit sounds much more gripping. Frequent Flyer ends up in pokey.

Seriously, JS, sorry to hear. This too shall pass.

 

[JS]

I hate it when that happens.

WHHHAAAAAAT?!?

Dunno 'bout the rest of you, but as interesting as this discussion of legacy airline pricing models may be, this tidbit sounds much more gripping. Frequent Flyer ends up in pokey.

Seriously, JS, sorry to hear. This too shall pass.

I was three months behind on the alimony (not child support, friggin alimony!). First offense is usually not a throw-the-book deal, but then this is SC Family Court. Judge sentenced me to six months or payment of the alimony arrears, whichever occurs first. It took five days to get out. On the bright side, I did get lots of sleep and exercise.

 

[Seatacus]

On the bright side, I did get lots of sleep and exercise.

I hope you slept with one eye open......