5 replies to this topic

[jleonnn]

I've been on AE for years but there's one thing I've always wondered about and never found an answer to. Why are the big airlines able to maintain such a powerful market position? And it varies from route to route. Take an example: 

 

I'm flying a route LAX-DFW, between my two hubs. I had to lower my ticket price to $80, which is half of what the next competitor is offering ($160). Without doing so, my load factor literally drops to 50%, even if i raise the price by just $1. How does this even work? One possibility I've considered is that I fly 747's on the route while most of the other airlines fly smaller planes like A320's (and therefore achieve much higher frequency). But does it really make that much of a difference? What other factors lead to such a scenario? And when I drop my price to such ridiculously low values, it seems the market share of those airlines barely move at all.

 

It also varies from route to route - some routes, I just need to lower my price by a few dollars to get my load factors back up, but on other routes it seems like no matter how low I go nothing changes - like my DFW-LAX route, which ironically, is an inter-hub flight for me. What gives?? 

[KJS607]

If you have a good business plan, good reputation, nice aircraft configurations within demands, you should have no issue filling flights

[jleonnn]

Now I've realised something even stranger! When I raised my prices, the market share of my main competitor actually decreased! (Even though my load factors remained constant at 100%) This of course only happened up to a certain extent... But can anyone explain why this is so? 

[Alfrenzo]

I don't know about AE dynamics (and yes - I've realised the same trend throughout years of playing) - but the fact that you're more competitively fighting at prices nearer to your competition means that you'r not stimulating demand at the bottom end of the market, and rather you're fighting for the same passengers at the same price point that your competitor has.

 

Else if your planes are 100% full due to increased demand by lower-fare paying passengers, then the unmet demand means that those willing to pay a higher fare will go to your competitors' plane and fill them up.

[jdub]

Unless you have way to many flights, or that route is just overwhelmed. you should be able to get 100% loads by matching the price.

[davedave]

Load factor only shows the split of green pax, they may be filling up with connecting pax from hubs. Route frequency has a much bigger effect than you might expect, too.