Originally Posted by KingOfSomewhereHot
You just hit the nail on the head. Instead of running an airline, they are chasing stock values and racing to the bottom to try and have the lowest operating costs.
This shows itself to the customer as shitty service, hidden fees and poor employee morale (and more shitty service that goes with that).
Yes, fuel is the single largest expense, and is about 4x what it was in '87 ... but airline wages are LOWER than they were in '87 (consider inflation) and they are giving you LESS service... So you're right, how can they NOT be making money???
Mostly because in the race to chase customers, they charge less for the ticket (including ancillary fees) than it costs to provide the service... So of course they're losing money.
It might only take an extra $20 per ticket to become profitable, but if one airline raises their price, and the rest don't, then nobody buys that more expensive ticket... So unless ALL airlines raise their rates, they're all stuck losing money!
With the advent of Internet ticketing, a person can look at tickets from a dozen different airlines, sorted by price... And in almost every case, the loretta traveler buys whichever one is cheapest... Even if the difference is only $1.
Most consumers will buy the cheapest fare that is consistent with their needs and wants (nonstop, time of day, etc). I agree this has put pressure on airlines to have essentially the same prices. But it's also shown how utterly complex and frankly, fucked up
their pricing models are. I've seen fares jump 20% while I'm browsing
. I've seen fares drop 10% in a day.
Instead of basing their fares on costs+desired profit margin and accounting for demand at certain times/destinations, airlines start adjusting for how far in advance tickets are sold, how many people book, how many seats are left, etc.
The other thing I think we're experiencing is that air travel has, in the words of my father, turned into a "bus in the sky." Air travel used to be a thing that the middle class did on special occasions, like the trip my family and I took when I was a kid. I flew exactly twice as a kid. Now, it's just a common way for people to travel. I think demand is increased as a result. This would be fine, but the number of flights has decreased. Planes are almost always filled to capacity now, because airlines have stopped flying half-empty planes by eliminating flights. So we have shrinking supply and rising demand, coupled with high fuel prices. The result is that the $220 fare from PHL to RSW (Southwest Florida) with no bag fees is now at least $350, plus security and other fees, plus bag fees and other fees.