trying to understand airline pricing

The golden rule of the airline business is to sell as many seats as possible for as much as possible. The company wants the planes full. That's the only way they can make money.

In 2008, American Airlines spent $14,676 on jet fuel every time one of their Boeing 757s flew one-way from St. Louis to San Francisco (1,730 miles). In other words, American Airlines spent $8.45 in fuel for each mile it flew. Assuming the 757 could hold 200 passengers, the cost per passenger is 4.2 cents per mile. So the hidden fuel cost for each passenger was $73 one-way from St. Louis to San Francisco. (For the sake of argument let's stick with this 4.2 cent figure from 2008, even though not every commercial flight is on a Boeing 757, not every 757 carries 200 passengers, and a 865 mile flight might not use exactly 1/2 the fuel of a 1,730 mile flight.)

Now consider: in September, I could fly from Chicago to Miami non-stop on US Airways for $339 roundtrip. Or, if I want to save money, I could make the same trip on the same airline on the same days for $237 roundtrip-- but it wouldn't be nonstop. I'd have to change planes in Philadelphia. The nonstop route is 2,400 miles roundtrip (fuel cost= $100). The Philadelphia route is 3,392 miles roundtrip (fuel cost= $142).

The logic to this is that the nonstop flight is a superior service, and if passengers are willing to pay an additional $100 for the convenience of getting to Florida 3 hours earlier, the airline should take their money.

But in doing so, the airline is shooting itself in the foot, because it incurs an additional $42 in fuel costs by routing the cheapskates through Philadelphia. The textbooks say that when a business's costs go up, it passes that expense on to the customer. Except if the business is an airline; their business model is to give the lowest prices to their most wasteful customers.

Which reminds me of my buddy who flew one-way from New York to Amsterdam with a layover in London. He had no interest in visiting the Netherlands, his goal was to get to London. But tickets to Amsterdam were $150 cheaper than tickets to London, so he did what any one-way passenger (with no checked baggage) would do: he "missed" his connection.

What you're saying is basically the reason why Jet Blue, and other carriers who do not use the "hub and spoke" model, can be extremely competative in the airline industry. They target direct non-hub to non-hub destinations which allow them to save that $40 premium on fuel and still maintain near full capacity. The downside is that you don't have the advantages of having a hub which can save on certain costs such as centralized maintenence facilities and ease of conveneince for airline flight employees. They can bear the brunt of costs for living instead of being put up in a hotel. Also, if you're not operating at a hub and your plane goes down for any reason, you're SOL until you get a replacement plane.

Also, I agree that the formula for demand that they use to price tickets is outrageous. I saw a round trip ticket that was $150 cheaper for $250 instead of $400 flying through a major hub from a city ~200 miles away.

Quote: reno

But in doing so, the airline is shooting itself in the foot, because it incurs an additional $42 in fuel costs by routing the cheapskates through Philadelphia.

Perhaps. But would they recoup any of those costs due to the fact that not all of the passengers are going all the way? By charging a proportionally higher amount for those just traveling to Philadelphia, is there enough in that fashion to account for the additional fuel costs?

My other question, and I'll be the first to admit very little intelligence in this area, is whether or not the taking off uses more fuel than the straight flight? What I mean is that you are using a figure of $8.45 in fuel for each mile flown. But does taking off use more fuel, that might generate a higher cost? If you have two flights of the same distance, but one has a layover, and the other does not, would they really result in the same dollar amount of fuel used?

Quote: konceptum

My other question, and I'll be the first to admit very little intelligence in this area, is whether or not the taking off uses more fuel than the straight flight?

Yes.

Take off (including climb-out), and landing to a lesser degree, use up more fuel than high-altitude cruising.

There are two main reasons for this:

1) Take-off requires full power from the engines. Landing doesn't, per se, but breaking does as the engine thrust-reverser are engaged to stop the plane.
2) Jet engines are more efficient at cruising altitude than at ground level.

This may vary with earlier supersonic jets, which required after-burbers to maintain speeds near and over Mach 1. modern fighter jets use after-burners to take off, boost speed and to reach maximum speed, but can cruise above Mach 1 without after-burners. Of coruse there are no longer any supersonic passenger jets.

Well trust that there are valid reasons why the pricing startegies are set up as they are. And since the airlines are tied to this hub and spoke system, they have to come up with a way to maximize revenues on all their flights, not just the most popular, direct routes. Since the cheapskates are taking the cheaper fare, that leaves a seat open for someone that will pay the higher, direct-fare.

It's not only fuel costs that seem to suggest direct flights should be cheaper.

Airlines pay a fee to the airport usage fees, and they are paying their ground people to haul your luggage from one plane to another.

Add it up, and anyone with half a brain would think that flights with stops and connections should cost more.


I wrote about this very problem here:
https://wizardofvegas.com/forum/questions-and-answers/all-other/1795-dealing-with-airlines-and-fares/
My flight to Vegas in September, I could fly direct from Newark for about $430. Or I could fly out of Philly with a stopover for about $260. One of my options for the stopover/change planes was in NEWARK!

Quote: reno

Which reminds me of my buddy who flew one-way from New York to Amsterdam with a layover in London. He had no interest in visiting the Netherlands, his goal was to get to London. But tickets to Amsterdam were $150 cheaper than tickets to London, so he did what any one-way passenger (with no checked baggage) would do: he "missed" his connection.

These opportunites are very limited. Most people are flying round trip and the airline won't honor the return flight if you miss the first connection. I see your buddy was flying one-way.

Also with international flights security is wary of these passengers since they often might be involved in a terrorist plan. If it had been the same plane (i.e. a stopover) he may have been detained on his next flight.

Mexican airlines have a fairly standard one way prices on their flights. Round trip is roughly twice a one way flight. That way it is easy to book an open jaw trip, using ground connections. Of course, they don't have a very elaborate flight network, with only a few airports dominant.