Air Travel United

Price reductions in air travel are a fact. Airlines implement a price differentiation strategy targeting consumers of economy class that is highly price elastic. For business class, price differentiation is not an option, as airlines are targeting more sophisticated consumers. Besides, business class, although it accounts for 20 percent of aircraft seats, it returns approximately 40% of revenues. Therefore, business class pricing is highly inelastic, while business class market is the driver for segmentation across the airplane.
Online travel agencies have also reduced the air travel prices. Travelocity, one of the most popular online booking agencies, sells cheaper airfares for the Top 100 most popular destinations, both domestic and international, by 50% during peak season. For instance, domestic round trip airfares from New York to San Francisco is under $250 with US Airways or United Airlines (with 1 stopover) or around $280 with United Airlines, American Airlines and several others (with no stopover). International airfares from New York to Madrid are around $540 with almost all airlines (with or without stopovers), while New York to Sydney airfare has fallen to $1,700. (Source: Travelocity 1,2,3).
The reasons for the price reductions in airfares are mainly two:
1) Major airlines have reduced airfares as a result of the recent peak in oil prices. Having peaked $140 a barrel in July 2009, oil prices increased dramatically forcing airlines to lay off thousands of employees, restructure their operations and reduce their capacity. Through corporate restructuring, they created customer value, while avoiding price war. Consequently, they achieved competitive positioning and were prepared to adjust their pricing policies as soon as oil prices began falling.
2) Another reason for lower airfares is passenger load. Due to the recent credit crisis and global economic downturn, consumers are often obliged to cancel their vacation plans trying to be prudent and in control of their finances. Last-minute cancellations, not only hurt the profitability of airlines, but mostly they inhibit their ability to estimate the percentage of occupied seats (passenger load). The load factor for Continental Airlines in February 2009 has dropped 4.6% (72.5% from 76%) on a year-to-year basis (Source: Continental Airlines, 4); the load factor for Delta Air Lines in March 2009 has dropped 2.3% (82.4 % from 84.3%) on a year-to-year basis (Source: Delta Air Lines, 5).
Apparently, although airlines are lowering their prices, consumers are not flying more. Major airlines try to match competitive fares, particularly in same round trip destinations. In larger cities with more than one airports, consumers have the option to choose the best fare deal even if that involves flying from an airport they don’t usually fly out of. By all means, consumers try to save money when they fly.
Moreover, there is no room for new players in a low-cost market. The more the airlines reduce their airfares, the more the airline industry becomes concentrated, leaving practically no room for new, low –cost carriers that can implement price differentiation. Besides, if oil prices increase again, airfares will rise automatically. And consumers are aware of that.
Sources:
- http://travel.travelocity.com/flights/AirSearch.do?SEQ=126072973040611132009
- http://travel.travelocity.com/flights/AirSearch.do?SEQ=126073004886011132009
- http://travel.travelocity.com/flights/AirSearch.do?SEQ=126073027256211132009
- https://www.continental.com/web/en-US/apps/vendors/default.aspx?SID=403B258E6C1F439F89D6A98777F33068&i=PRNEWS” target=”_blank”>www.continental.com/web/en-US/apps/vendors/default.aspx?SID=403B258E6C1F439F89D6A98777F33068&i=PRNEWS”>https://www.continental.com/web/en-US/apps/vendors/default.aspx?SID=403B258E6C1F439F89D6A98777F33068&i=PRNEWS
- http://news.delta.com/index.php?s=43&item=427
About the Author:
Christina Pomoni has acquired her MBA Finance from the American College of Greece. Her advanced familiarity with financial statement analysis, capital budgeting and market research has been acquired through her professional career at high-esteemed organizations. As part of her long journey, Christina has served as an Equity Research Associate at Telesis Securities (EFG Eurobank) and a Financial & Investment Advisor at ING Group. Besides, having lived at Chicago, IL, Boca Raton, FL and Paris, France has helped her, not only to be a successful professional, but mostly to see life under a more creative and innovative perspective.
Since 2005, Christina provides high quality writing services to numerous websites and research companies contributing her knowledge and expertise. Her areas of specialization are Business, Finance & Investment, Society, Politics & Culture. She also has a very good knowledge of Entertainment, Health & Fitness and Computers & Technology.
Christina currently designs the website of her own writing company. Believing that knowledge is the road to opportunity and development, her mission is to promote her already established knowledge to a growing number of visitors and to provide high quality writing services to meet the most demanding customer requirements.
Article Source: ArticlesBase.com – Reasons why air travel is getting cheaper
Do I need a Visa (Mexican)/permit to travel to Utah from Arizona?
I need to travel to to Utah and I have a Mexican tourist visa to travel in the United States, the problem is that I don’t have a permit to travel to Phoenix, Do I need the Permit to travel by air and what do I need to travel?
You don’t need a visa. You can go anywhere in the United States With your tourist visa. All you should take is a photo I.D. like your Mexican passport.
Air Rage United Flight #857



