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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Mary Cluney who wrote (67440)	5/21/2008 3:08:00 PM
From: DanD	Respond to of 542889

Competition.

To: Mary Cluney who wrote (67440)	5/21/2008 3:14:47 PM
From: TimF	Respond to of 542889

What happened to supply and demand? How did the airlines lose pricing power? Nothing much happened to supply and demand, but the supply can not rapidly change back and forth to meet demand, and travel, while generally trending up, is somewhat cyclical. If the airlines overbuild when things are good, than the next downturn causes them to have too much capacity, and its not like they can sell the aircraft for the original purchase price. Airlines try to sell the most expensive tickets to those who have to fly at particular times, and then sell less expensive tickets when they can't fill a plane at the higher price. Say you fill half the plane at $400 to $600 per ticket, one quarter at $200, and another 10 percent at $100, than they will be happy. (Note both the prices and percentages where pulled out of thin air to represent the point, the general point is correct, but the specifics would vary widely) The problem comes when at particular times, for too many flights, they can't get enough for those $400 to $600 ticket sales, and start having to sell more and more of their seats at a discount or have them go empty.