A thread I was reading earlier hinted at this. Let’s say I want to visit a friend via a flight tonight that is half empty. Can I show up, state my intentions, state that if I don’t get a good price I will not go, like you can at hotels? Has anyone ever done this?
The problem is the computer has to spit the ticket out and the various “fare buckets” are what they are. Even if a given ticket agent wanted to do this for you, I don’t know how he could generate a ticket that overrode the lowest-available fare bucket.
The allocation of fare buckets is done, AFAIK, by revenue management departments (read: corp. HQ) and is a black art (and constantly shifting). The fiction is that the pricing structure for the various seats is constantly adjusted so as to yield “optimal” revenue for a flight, for a day, for a month. Accordingly, if a plane is about to take off half full, and you are not willing to pay as much as [lowest available fare in the system], they’d rather have the seat go empty than cannibalize their future sales by eroding the price below the optimal mix.
Next time you’re on an international flight, you may well notice that coach is crammed and business/first class mostly empty. Many intelligent frequent flyers have said – so can’t I offer $200 and upgrade? The same number of people will be on the plane, and they’re $200 the richer. But (these sort of things are abundantly covered on sites like flyertalk.com) the airlines generally don’t view it this way, and would rather the seat go empty, or be given to a deadheading employee, than sold at less than what they regard as the optimal-mix price.
Thanks Huerta88- good info!
The little ex inventory analyst in me agrees since their product is a space on a plane. At a certain point its more cost effective to write something off than sell it for a song. If this became policy many would never book ahead, they would just all camp out at the airport looking for cheap flights.
IF anything IMHO under the first class scenario given, if it was MY airline, the people who booked furthest in advance would be upgraded and add ons would be given the option of coach, or waiting for the next plane.
I experienced this once.
I got to the airport 5 hours earlier than my flight (don’t ask) so was looking for an earlier flight. The airline i was using had no earlier flights so I looked for others figuring I’d just use my existing ticket another day and pay the surcharge for doing that. I found an airline who said their plane was only 2/3 full. The flight was due ot leave in 45 minutes so I figured just enough time to get my ticket and get through security. When I asked the price they quoted me the $600 deal they use to screw anyone who has to fly last minute. I asked if she was kidding…the flight was leaving in 45 minutes with many unused seats. How could they possibly think it was better to let it go empty rather than collecting the more normal $200(ish) price? She shrugged and said that was the deal…take it or leave it.
Needless to say I left it and camped in the airport for 5 hours.
While the explanation above is a very good answer I simply do not understand the reasoning behind it. While I can see ailines do not want to ncourage people to wait till the last minute to buy tickets in hopes of a good price I think most people would not do that (and planes are generally very full these days so that would be a dicey proposition at best if you wanted to get anywhere). It just makes no sense to me how an empty seat is better to the airline than $100 for that seat.
I think it has to do with the future expectations of customers. Sure, they’d get the extra 100 bucks out of you now in the short term, but in the long term, the space would be regarded as cheaper by the airline customers. Basically, they’d be undercutting future pricing for short term profit today.
Few things:
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Nobody’s saying these revenue-optimization models are perfect – except maybe the rev. management people who create them, and have an interest in flogging them. They may have a bit of pride or embarrassment at stake if the price mixes they’ve been recommending lead to empty planes and low revenues.
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You’re not reckoning on some knock-on consequences. If we open up airline seats to “what’ll you give me for this seat?” when a guy shows up at the last minute, what do you think will happen when his seatmates hear that he paid $100 for the ticket they paid $900 for? The $100 positive revenue they gain from him would most likely be more than offset by many hundreds of dollars of bad will or refund demands from the others on the plane. Cynics think that one of the reasons fare-bucket-allocation is so complex is to mask/prevent price transparency and prevent everyone from demanding a fare as low as the lowest fare on the flight. “Oh, but sir, that’s a K ticket, you can’t possibly compare it to a Z class ticket.” Even though it’s the same seat. Allowing people to dicker as in a bazaar creates unwanted transparency and calls attention to the fact that the product is a commodity, at some level.
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Every retailer fights price erosion. Longterm price maintenance (if successful) may well offset the incremental loss from refusing to take a last-minute lowball offer that (on its face) is “free” money for the airline given the fixed cost of taking off with a half full plane vis a vis a half full plus one plane.
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Airlines like any business like to be able to know what their revenues and loads will be, and to know it early, and to book the revenue as soon as possible. Thus, airline pricing policies generally (and with plenty of exceptions) tend to reward early booking and punish late booking. Thus, the “the seat’s going to go to waste, c’mon, give it to me for $50 and you’re still ahead” argument flies in the face of a strong overall policy disfavoring last-minute purchases.
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There are exceptions. A few years ago, the airlines started runnning weekly Internet specials for (implicitly) flights that hadn’t really filled up. But they are sporadic enough (as to any given city) that I doubt they are “cannibalizing” any revenue or giving people the incentive not to buy a ticket they otherwise would buy. You just can’t be sure that, say, Oklahoma City (or even Los Angeles or New York) will come up this week from your city.
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This brings up another point: While the airline is cutting off its nose to spite its face in refusing “free money” by not selling you a ticket below its set asking price, it is also making the not-irrational bet that most people who need to get someplace will pay a reasonable if not rock-bottom fare to get there. If you really need to go home, and certainly if you’re on a business trip, you’ll suck it up and pay rather than walk out of the airport.
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The high, high price of the most profitable fare buckets is proverbially what drives airline profitability. Take my upgrade example: While the $200 you might offer them as the plane is boarding with an empty first class section seems like a sure thing, found money, to them – it’s not impossible (at any time up until the cabin door closes) that ten businessmen would show up and buy those first class seats for $3000 apiece. (Even more dramatic example: I fly to Asia, paid for by a customer; the seats in Business run $9k, coach is about $600). The revenue management model tells them they are justified in maintaining Business as an exclusive product that you are ONLY going to get if you pay full fare for it. If there were a decent chance I could get a cheapie upgrade, I might start gaming the system and flying coach. Giving up a sure chance at a small amount of revenue (even multiple times) may be less of a problem to the airline than giving up or compromising even a much smaller chance of a hugely profitable sale.
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The fact that, as noted, most planes are full these days shows the airlines’ model isn’t completely stupid. And, they are willing to be flexible. A few years ago Continental lowered the cost of their first class because they found they could make more with FC 100% full at $1000 a ticket vs. 33% full at $2800 (or whatever). They’re always fine-tuning the math, but no one (including the LCCs) has yet found it advantageous or practicable to do specifically what the OP suggests, which implies to me that it just wouldn’t be good business (now, half the airlines are in bankruptcy, so you may validly question whether they’d know good business if they tripped over it, but . . . .).
But they wouldn’t all get cheap flights, because the shift in demand to a different time would change the fee structure.
For example:
Scenario 1: Plane due to leave with 20 empty seats, and two people want seats. Airline sells the seats more cheaply in order to make at least some money.
Scenario 2: People find out about Scenario 1, and decide to wait. So, plane now due to leave with 30 empty seats, but there are now 40 people wanting those seats. Airline has no incentive to offer lower prices, and people have to pay the full price or get stranded.
You might well be right about the airline’s reasoning, but if you are, i think the reasoning is spurious.
I, presumably like most other airline passengers, am well aware of the advantages of booking ahead, and the potential pitfalls of leaving things until the last minute. I’m also aware that business class costs considerably more than economy, and i’m willing to take the relative discomfort of economy in order to save a whole shitload of money.
If some airline offered me a seat in business for a nominal price increase, because the plane was about to fly with empty seats, i would have no expectations about the future price of business seating being lower. In fact, the airline’s desire to make more of its passengers comfortable (and not just the ones who move to business class; moving those people also makes economy less congested) would predispose me to travel with them more often.
I’ve been upgraded (for free) twice on international flights, and it never made me regard business class space as cheaper, in the way you suggest. All it did was improve my opinion of the airline in question.
If nothing else, this suggests that the administrative difficulties and unpredictabilities make a “bazaar” style approach problematic. The rev. management models now in use provide a somewhat steady-state and (unless the rev. mgt. people and software are really stupid), presumably verified and benchmarked to within +/- x% accuracy, model for getting the number of passengers on the plane that will provide the optimum available profit. Why would they shake the snowglobe again even if (as you imply) things would eventually settle down and all perverse incentives would cancel each other out?
The airlines’ numbers suggest, to them, otherwise. Example: five years ago, I had Platinum status with my usual airline. Under that freq. flyer program, I could automatically upgrade for free when space was available on a domestic flight. And it often was. At that time, First Class fares were about six or seven times higher than coach fares. I would never (even with OPM, which is an important factor in business travel) have considered buying a first class ticket. Not only was I getting a free upgrade 60% of the time, the price differential was just too ridiculous. Lately, the airline has had heavy passenger loads. At the same time, they’ve lowered their first class fares and made fewer upgrade seats available. Now . . . I would consider buying a first class seat that is only three times as expensive when I have little chance of getting it for free. As I said, they may get the game theory wrong, but they are constantly running the math and seeing what works in which markets, and they game these things as closely as a bookmaker readjusts his pointspreads.
Also, I suspect airlines would be nervous about entrusting as much discretion/revenue impact to line-level ticket agents or gate employees. How would they know how low an offer to accept? How could the airline be sure every gate agent wasn’t calling his 50 closest friends and neighbors and saying: “Psst, pack a bag and come on down to the airport – the Cancun flight’s empty and I’ll be able to accept your lowball offer!”
The airline’s reasoning has been pretty well hashed out, but there is one more point to be made about the OP’s specific situation. Last minute seats tend to go for very high rates because in general only people who are willing to pay just about anything don’t book in advance. You say you are not one of these people, but rather someone who is willing to walk away.
How does the airline know the difference? If they believed you there would be no reason for every other last minute traveller not to make the same arguement and get the cheap ticket rather than the overpriced one that they are actually willing to buy. It is safer for the airline to just assume you are bluffing, and take the minor loss of revenue if you are not, rather than risk turning many of their high priced last minute tickets into deeply discounted ones.
I’m sure you’re right about that, and the possibility for abuse would certainly exist.
Wouldn’t it be possible, though, to remove such employee discretion with some computer-generated algorithms for price scheduling?
For example, if a plane has X% of its seats empty, and it is less than Y minutes until takeoff, fares are reduced by Z%. Surely it would be a pretty simple matter to build in a formula that adjusts as flight time gets closer and as seats are sold.
On one level, i’m not even sure i see this as a problem. If the Cancun flight is going anyway, why not fill it up with people for relatively cheap fares?
The main argument against this would be your earlier argument about the perceived value of a seat, but if the airline has already decided that filling the plane is the priorty, then this might not be such an issue.
Anyway, it seems to me that this whole issue is becoming increasigly irrelevant, as airlines pare back flights in order to cut costs. The last few times i’ve flown, every flight has been overbooked and people have been asked to volunteer to stay behind.
That sound right. Two months ago, I was in Paris and needed to get back the States. Same day travel was $9000. Next day was $2000.
[sub]I stayed in a hotel for the night[/sub]
Well, that’s exactly what the revenue management software is.
But it cannot be this simple or it would change the market. If price decreased linearly (or in any predictable fashion) with time to takeoff, no one would ever buy a ticket a month in advance. So, the rev. management sofware balances a lot of things: Pricing tickets high enough that a seat that could have been sold to a last-minute business traveler an hour before takeoff isn’t sold for one-fifth the cost to a college student an hour and one minute before takeoff; clearing tickets that will “otherwise go to waste.” Providing incentives for advance purchase (and making sure that there is not a perceived pattern of advance purchasers being de facto punished by seeing the same ticket sold to a latecomer at a fraction of the price); etc.
This will lead to different outcomes in different situations. Right now, there are routes I could fly from my city, tonight, that would cost me $900 or more for a not-very-long flight (I’ve been penalized) but I also just found a few fares for $188, and not puddle-jump flights either.
This advanced revenue software and brilliant mathematicians gaming pricing is all well and good but surely it is worthy of note that despite this many airlines are struggling to stay profitable. Yet when we look to those airlines that are profitable they generally do not engage in these fantastically complex pricing strategies (I really wonder if any one person at the airlines could say they truly have a handle on all the pricing schemes available at any given time).
I realize there are many factors beyond pricing strategy that go into an airline’s overall profitability but nevertheless I cannot help but think it is a factor. I view most airlines as the equivalent of used car salesmen who will try to bilk you for every cent they can get. It makes the whole experience of buying a plane ticket very annoying because you always have the sneaking suspicion you could get a better price.
On the other hand the low cost carriers like Southwest have a very straightforward pricing strategy. They give a modest but worthwhile price break to booking in advance and then the flat fare. If the plane is taking off in five minutes and you want to buy a seat pay the advertised price and you’re done. It makes someone like me who only flies a few times a year turn to them first when looking for a flight.
“But they are low cost carriers and the creature comforts are not as nice,” you might say. Well, at one time that may have been true but frankly today I cannot tell the difference between the cattle car on Southwest and on United. Of course United and the like have first class available but in my view their higher priced cattle car tickets subsidize most of the people sitting up there. If you are a frequent flier it may make sense to adhere to a single carrier so you can get all those free upgrades that do not exist on Southwest. But for the more casual carrier they will never obtain enough miles to make it worthwhile to adhere to one carrier especially when they pay higher prices for their ticket than can be had elsewhere.
So, in the end the clever pricing strategies, at least to me, feel like I am getting screwed by the airlines if they can. When I know a plane with 40 seats empty is taking off and their computer says, “He needs to fly now…ask for $600” more than a few four letter words spring to mind. At Southwest they’d say, “No problem…pay what everyone else is and have a good flight.” As a result Southwest gets my business whenever possible. Given their success it would seem theirs is the better strategy (again I know pricing is not the only key to their success but still it must count).
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These days anyone attempting a last-minute flight just to save a few bucks is bound to be flagged a more indepth security check than a traveler who booked ahead of time. Even if a last-minute discount were possible, I wouldn’t put it past the checkin folks to flag your ticket for security so that you miss the flight in the first place.
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How about cruise lines? Don’t they have the exact opposite policy? Why is that?
A few years ago I was flying and the guy in the seat next to me was US Army returning from Iraq. We were talking as the last passengers were being seated. First class had empty seats. Feeling all patriotic, I asked a flight attendant if the airline would consider moving the soldier to first class. A few others seated around me overheard my question and pretty soon a bunch of us were “urging” the flight attendant to upgrade the soldier.
Before take off, he was moved to first class after the flight attendants huddled and discussed the situation. The flight attendants said that they could be fired over their action, but it would be worth it.
Actually, it’s not just the low-cost carriers like Southwest who give worthwhile price breaks for booking ahead. I’m not an especially frequent flyer, but i do fly at least a few times a year, and i usually know well in advance what dates i want to fly. In many such cases, i can go on a budget travel website like Travelocity or Orbitz and get a flight on United for the same price as a Southwest flight to the same destination.
If a United flight and a Southwest flight cost abut the same, and are going to the same airport, i’ll take the United flight every time. First, i’m a member of United Mileage Plus frequent flyer club, and although i don’t travel that often, i’ve managed to accumulate enough miles for three domestic flights, or one return flight to visit family in Australia.
Also, while i quite like Southwest and have flown them on quite a few occasions, i really do find it much less of a hassle having an assigned seat and not having to worry about whether i will remember to check in online and get a Group A boarding pass.
Now, i’m aware that, for some people, Southwest is nearly always much cheaper, but so far i have tended to fly to places where United has a strong presence, and so there have been decent fares available. If my trips were to Albany or Florida or Austin then Southwest would probably always be cheapest, but flying to Chicago or California it’s often just as cheap flying United, as long as you book far enough in advance.
Gate agents have “operational upgrade” authority but it is usually done only when coach is full and/or some frequest flyer or price-of-ticket profile is met. I am not sure if the stewardesses on particular airlines have it, but I’d imagine they’d get tired of being wheedled and cajoled in situations less compelling than the one you describe.
Duckster is quite correct that walk-up ticket purchases (try doing a walk-up one way purchase as I’ve had to do several times in recent years) are almost certain to get your ticket flagged with the SSSS (enhanced security search) tag. It’s an incremental hassle (pat down and shoe scan, and I’ll note that some airports have decided that shoe scan is mandatory for everyone, anyhow).
Business school classes have probably analyzed the LCC situation a billiion times, but I will note that lots of financial analysts attribute the LCC’s successes in large part to (1) lower labor costs (due to, for the start-ups, having a younger or cheaper or less-unionized set of employees); and (2) lower maintenance costs (newer planes). Many predict that, say Jet Blue will see its operating costs escalate (while its revenues don’t) as these factors are no longer so true. Of course, Southwest has been going for 30+ years so that analysis doesn’t fully apply. But as Southwest if flying a different mix of travelers to a different mix of places vs. the old-line carriers, the comparison isn’t fully apt.