Interesting video......
https://www.youtube.com/watch?v=BzB5xtGGsTc
Yes, to me it's interesting. I'm sure some (many?) are bored to tears by such a subject, but I find transportation pricing fascinating. (I once did it.)
The subject air carriers are differentiating their market by the elasticity of demand. (Elastiscity is basically the effect of price on sales volume.) If their customer is traveling on business and it's important business, he/she is going to go. So the carrier can charge more. Tourist travel is more discretionary, so the carrier offers a lower fare with reduced accomodations. They serve both markets and maximize the carrier's revenue in doing so. That's what you want to do.
Freight railroads are in the same situation. The goal is to charge as much as you can without loosing the sale. Sometimes you're playing poker with a customer. They'll bluff and say they need a price of $X. You've got to be willing to call their bluff and insist on $X+. Guess what, sometimes they ain't bluffing and you'll loose. The sales department hates you for this, but it's part of the job. Like a good poker player, you've got to know what you're doing and realize that it's not about one hand/sale. You've got to know your markets and your competitors' prices.
The video also gets in to the complexities of pricing on a connecting network. How much of the through revenue is assigned to each flight? (AKA each production segment.) You can reasonably isolate the cost of each segment. But the offsetting revenue assignment to each segment is generally arbitrary. So, how low can you go on a network segment?
Rail freight pricing is more of an art than a science. Understanding the elasticity of each customer group is critical.
I recall hearing of a business traveller who flew between two points on a weekly basis. From X to Y on Monday, then back from Y to X on Friday.
Until he was found out, he would make two reservations - one to fly round-trip between a Monday and the second Friday (thereby including the weekend), and a second round-trip between the first Friday and the second Monday (also including the weekend).
The airlines usually lower the price of a ticket if it includes a weekend. By making the reservations the way he did, he took advantage of that. Of course, the airlines don't see it that way...
He apparently wasn't the first to do that. I think if I were to try it, I'd be making my reservations on two different airlines, to reduce the possibility of detection...
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The airlines now have software that automatically cancells the rest of the reservation if you miss a segment, just for this reason. Hub fares can be more expensive, but you are partly paying for the convenience of most of your flights being nonstop, one segment flights.
ATL is Delta's HQ City, and having lived on a city that was 'served'(MEM) by them, the local 'flight rule' was that everyone went via ATL. to go anywhere else.
To the extent that many conversations on flying out of MEM usually got around to the statement"...If the Devil was going to 'H3LL'. He'd Have to connect in ATL..." The when MEM became a major HUB for Northwest. MEM picked up a similar role as had ATL had with Delta. Same deals different airline.
After a time, folks in search of. some way to beat the price/fare system, found that they could drive from MEM to LIT, and catch Southwest there.(That got to be such a popular alternative, there was a regularly scheduled limosine/ bus service terminal to terminal.) One could park cheap at the airport in MEM; ride to LIT and return back, pick up their vehicle and save overall, something like fifty to seventy-five bucks. Now that NW and DELTA have merged, I'd bet people have figured out how to get ahead of that system, as well(?). As greyhounds noted, the whole wirfare business seems to equate to a giant poker game.
Very true Sam ... Great thing about our move to ATL is that we only saw some relatives when they were making connections. ;)
Once you have to make a connection then there is more competition.
tree68Until he was found out, he would make two reservations - one to fly round-trip between a Monday and the second Friday (thereby including the weekend), and a second round-trip between the first Friday and the second Monday (also including the weekend).
I forget the airlines term for that but if they catch you doing it they will not only throw you out of the Frequent Flyer program, but put your employers discount in jeapordy as well. If you fly via discounted fare or FF rules, the airlines will prohibit you from doing that. It's in most of their terms of service. They call it "Back to Back" or something like that. From your flying patterns the airline knows your home city and they have algorithums to catch that.
Now if your always flying full fare, not using the award programs and not flying under a group purchase discount........then I don't think they will take retalitory action and you can get away with that.
See the legal status section of the wikipedia link below:
https://en.wikipedia.org/wiki/Airline_booking_ploys
So back when I was a consultant with IBM, generally the airline would tolerate this once or twice and then they would issue a warning letter. If you continued with the practice they would cancel your FF program and confiscate the mileage you had accumulted. Second course of action was to notify IBM that their group travel discount could be in jeapordy and spot light you as the reason......which led to a call from HR and a lecture on travel ethics.
I sometimes fly from my regional airport in Grand Rapids, Mich. to Denver. Usually I needed to make a connection at a hub airport. Then a few years back United began offering a direct non-stop. At first it was a somewhat more expensive than a flight with a connecton. But lately the prices are compatable, and some times the non-stop is actually cheaper. My guess is that one of the segments (Chicago-Denver?) is in more demand.
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