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On 3/3/2003 6:55:53 PM will fix for food wrote:
KCFlyer on other threads makes a good argument for an overhaul of the fare structure. What are the opinions out there? Should this or should this not happen? Why isn/t AMR going ahead with this if it is beneficial?
I have to admit that I have no experience actually shopping around and/or paying for an airline ticket, so I can/t comment with any knowledge about fares.
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The bottom line issue, plain and simple, is the need for airlines' revenues to exceed costs. On the revenue side, the average fare paid will need to increase for there to be any prospect of meaningful recovery for the likes of AA, UA and DL.
That is where the basic premise behind Value Pricing comes into the picture. It's all about Equitable Pricing -- where all pax, regardless of their reasons for flying pay their fair share of what it costs the airlines to provide the service from which they benefit.
Value pricing does not, for example, single out business travelers to pay outrageous fares to make up for the revenue shortfall incurred by packing the same flights with VFRs and vacationers traveling on below-cost fares. That scheme has failed to the point where airlines practicing such folly have put their futures in jeopardy.
On the other hand, business travelers, and some leisure pax, are willing to pay more for more flexible, fully refundable, fares -- but not 5-10 times more than others on the same flight paid for their restricted fares. And VFRs and vacationers are willing to take the risks inherent in purchasing lower fares because flexibility isn't an issue; their plans are more set.
It costs more for airlines to be flexible with pax, so pax expecting such service should also expect--within reason--to pay more. Five to 10 times more is not within reason; 1.5-2 times more is.
The crisis in yields for the airlines is the predictable consequence of the unconscionable inequities of their pricing. Walk-up fares reached a point where they became a deterrent to flying while the loss-leader fares the airlines offered in their myopic pursuit of packing their planes have conditioned customers to expect fares that come nowhere near covering costs.
Value pricing addresses both issues by making walk-up fares justifiable to those who value the flexibility while increasing discounted fares to a level where others are paying their fair share of what it costs the airlines to provide the service from which they too are benefitting.
Also, with Value Pricing, you don't have 25 plus different coach fares that customers on the same flight may have paid. Instead there are no more than 4-6 different coach fares with the ratio between highest and lowest at no more than 2:1.
Customers would be willing to pay more at the lower end of the fare spectrum IMO -- IF there were any semblence of simplicity, consistency and fairness in the pricing model. And busness travelers actually would purchase "business fares" (instead of figuring out to beat the airlines at their own pricing games) if others on the same flights were paying their fair share albeit at lower fares for less flexibility.
Another tenet of Value Pricing IMO is that First/business class should also be a profit center, made available only to customers paying first/business class fares (at realistic pricing levels -- $50-200 above walk-up coach fares). Upgrades should be offered solely on the basis of availability at check-in for a mileage-based fee with pax holding walk-up fares given priority status.