I’m considering getting one of those cheap tickets you see which is a direct round trip from MSP to Orlando for $60 including fees (it wasnt the date i wanted but it was cheap). How does that make economic sense for the airline? Sure the plane is making the trip anyway, but how can hauling my 200lbs of man meat 1500miles for $30 each direction not more than offset the fuel?
In: Economics
Its called expiring inventory. The plane cost roughly the same to fly with or without passengers. The plane is leaving no matter what, it has to pick up passnegers on its next stop anyways. .
Even selling a $69 ticket is going to increase total marginal profit.
They then use price discrimiantion to fill the seats. Start out at a price and keep adjusting it until the plance is full.
The downside is that some customers will figure out the system and game it.
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