>
Date: Thu, 16 Feb 2006 10:40:58 +0900
X-Mailer: QUALCOMM Windows Eudora Version 6J
>But the surprising result of my inquiry after visiting some webpages
>and making a call to the local office was:
>
>return flight: $772
>one-way flight: $1742
>open return flight: over $4000
>
>These prices are quite astonishing and they fundamentally challenge my logical
>thinking: If I fly twice as much, then I pay only half as much - shouldn't
>it be the other way round?
This is only surprising if you consider a flight as a good that can
be produced at a constant price, and assume that the airline is charging
you just the price (plus maybe a fixed profit margin).
Both assumptins are wrong. If the airline has jets that fit 300 people,
flying 50 people is about as expensive overall as flying 300 people,
whereas flying 301 people is much more expensive. Also, the airline
is trying to charge you as much as they can. Sometimes, that may be
very little, but still more than the cost of additional food and gazoline
that they have to spend on you. Sometimes, it's a lot, lot, more, because
they somehow found out that you are willing to pay a higher price, and
they would be stupid not to ask you for the money that you are ready to
pay anyway.
That easily explains why open tickets are much more expensive than
fixed ones: They know you want the flexibility and are ready to pay
more for it, and you might use your return flight e.g. in summer, when
they can sell even fixed flights at a much higher price. Also, they
have to keep a certain amount of seats free on flights for open tickets,
just in case you might show up.
It also to some extent explains why return flights are more expensive.
The return flight business is a large market and highly competitive, so
they lower their rates. There are comparatively few people who take
one-way flights, so there are not as many discounts. (It's easily possible
that your return flight had restrictions such as 'book/pay 2 weeks
before you fly', whereas the one-way flight probably didn't.) Also,
Swiss probably figured out that while the average private customer
may figure out that they better buy a return ticket and only use half
of it, there are still corporate travel departments that just
buy a one-way ticket when they need a one-way ticket, and corporate
accounting departemts that wouldn't allow the purchase of a cheaper
return ticket when all that was needed was a one-way ticket.
Similar arguments also explain why flights via a third destination
are less expensive: airlines may make more money if they sell a
certain amount of direct flights at a higher price to people who
don't have the time and patience of spending a longer trip, while
selling the rest of the tickets to people who want the cheapest
flight but don't bother with additional inconvenience.
The main reason that we are not seeing more similar things in other
industries is that the airline industry has an unique combination of
serious price tags that make it worth both for airlines and customers
to play these price games, highly specific products (by day and
destination,...) that allow price differentiation, and openness
Received on Thu Feb 16 2006 - 02:04:51 PST
