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
Say €60 is break even (lowest they would sell at), but people are willing to pay:
– some less than 60: they will never fly with you
– some exactly 60: they’ll get this flight
– some more than 60: they may get this flight, BUT: some may choose a more convenient date. They will pay for extra flexibility.
So the airline wants to extract most amount of money, but doesn’t want to miss any sales.
If they price higher than 60, they loose sales. So they sell a few at 60, these people won’t have much flexibility. Then the price goes up for people that want to be able to choose their dates more precisely (eg business people)
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