On Tue, 11 Nov 2003 15:05:46 -0500, Wet Racoon
wrote:

Malcolm Weir wrote:
But still, it's entirely *sensible* that the longer route involving a
change of aircraft should be cheaper. It's less attractive to the
consumer because it takes longer and involves a change, and it can be
provided at lower cost since each segment consolidates traffic between
many city pairs.

If you view sale of such itineraries as a way to fill otherwise empty seats,
then yes, it makes sense to "dump "inventory as lower prices, just like a seat sale.

No, it's the reason *why* the airlines structure themselves the way
they do. Nothing to do with "dumping" inventory.

"Hubs" make very little obvious sense to the consumer; they make all
kind of sense to the airlines.

However, when your network is made up of mostly such connecting itineraries,
it is one reason why your airline cannot compete with the ilks of Southwest.

You evidently have little idea that Southwest is absolutely delighted
to sell bazillions of nice connecting itineraries. Which makes *that*
observation of yours rather silly.

There is no way that it costs the airline less to fly you via chicago versus
putting you on a non-stop flight. Consider the additional landing/takeoff
costs, gate costs, luggage transfer costs, extra staff at gates, and the costs
when flights are delayed/cancelled and you have a bunch of stranded people at
the connecting city (hotels, meals etc).

Even without dealing with the fundamental observation that it really
does cost the airline much less to fly you "via Chicago" in the cases
where they *don't* offer a non-stop flight (because flying via Chicago
gives them revenue, and the alternative gives them nothing), you
appear hopelessly deluded in thinking that airline tickets are priced
based on *cost*. This hasn't been the case in the USA since 1976.

This is another of those funny pricing schemes such as charging more for A-B
than you do for A-B-C.

No, it's an entirely sound business model, and is identical to the
models used by phone companies and interstate trucking companies, not
to mention the overnight delivery companies. It works.

The fact is that what the airlines are doing is selling tickets based
on the idea of incremental cost. A flight from A to B will cost a
certain amount of money regardless how many seats are sold, and then
there's a relatively small incremental cost for each passenger. If
you don't have enough customers willing to pay for that route, you
will lose money. But if you use a hub-and-spoke model you can make
money from people who want to fly from A to C, D, E, and F *in
addition* to those wishing to fly to B.

*AND* the lovely thing is that if you have (say) 100 people per flight
willing to fly A-B, you have to use a roughly 100 seat aircraft to
economically service that route. If you *add* (say) another 50
people, you can use a (roughly) 150 seat aircraft, whose operating
cost-per-passenger is lower. That becomes even more relevant when the
demand fluctuates: you can cushion changes in the demand by using
excess seats for hub-and-spoke traffic.

At one point, this big money losing airlines in the USA will have to dump
their virtual pricing schemes and start charging what it actually costs for an itinerary.

Which will surprise you, and not in a good way.

Malc.