The Homa Files

Excerpted from WSJ: “Airlines Revive Minimum Stays On Cheap Fares”, August 19, 2008

One of the craziest aspects of the airline business is that two passengers sitting side-by-side can pay vastly different fares for the same seat — sometimes hundreds of dollars.

Airlines contend business travelers buy a different product.

A business traveler pays more for a seat purchased close to departure because the airline has taken an economic risk to hold that inventory back. And business travelers pay more for tickets with fewer restrictions — you pay a lot for the ability to change or cancel.

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Now, get ready for a wave of annoying airline rules requiring you to stay at your destination a minimum number of days or over a Saturday night — if you want the cheapest tickets.

The move is an effort to force (price insensitive) business travelers, who usually need the most flexibility and want to be home on the weekends, to pay more for their flights.

Airlines have increased restrictions on cheap fares by raising overnight requirements, upping what had commonly been only a one-night stay requirement to two and three nights.

Airlines tried to bring back Saturday-night stay requirements earlier this year.  For many years the Saturday-night requirement was a prime tactic airlines used to separate business travelers from leisure customers. The Saturday-night stay forced many business travelers to either pay hundreds of dollars more for each ticket, or to spend an extra night or two on the road to save money. If the choice was a $300 ticket or a $2,000 ticket, many companies would ask travelers to stay over Saturday night at a nice hotel, have a nice meal and still save hundreds.

But the change didn’t stick, mostly because discounters compete on so many routes these days … without onerous restrictions.

(So) business travelers see them as a more-viable alternative as the price gap widens in fares. If big airlines run their prices up too high by making discounted tickets unavailable to business travelers, they risk losing customers. That’s been the history, likely to repeat this fall.

Full article:
http://online.wsj.com/article_print/SB121909457563650833.html

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Thanks to Justin Bates, MSB MBA for the heads-up.

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This entry was posted on August 20, 2008 at 7:08 am and is filed under Mktg - Pricing, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.