LyrArc Article Gist
Airlines are learning to price aggressively, and sophisticated pricing models are helping to improve revenues. Online buying and search habits of travellers aim at getting lower prices, even as the airlines are using pricing models to price aggressively by monitoring passenger buying throughout the day. Further consolidation, as for instance a merger of Delta with US Airways, would further shrink airline fleets and raise prices as seat capacity is filled up. Southwest Airways continues to expand its fleet and is moving in the opposite direction, but it is also expanding routes flown and is increasing its presence in the market visa vis the other airlines. Overall, with 80 to 100% of capacity filled, airlines are finally obtaining some of the pricing power to operate at a profit. Note that leisure fares and business fares are moving in the opposite direction. Leisure down 9% year over year, business up 20% year over year. After the seats fill up the unsold seat is discounted as a filled seat vs a unfilled seat, means at the margin pure profit for the filled seat even at highly discounted rates. It also raises the capacity filled per flight to a higher level.