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Saturday, June 11, 2011

Supply and Demand, Airfare Is Skyrocketing

June 10, 2011 by Douglas French
Jad Houawad reports for the New York Times that airlines have been able to continue filling their planes while still increasing prices. However, the airlines are worried, having
failed to raise fares in six of their seven efforts since March, suggesting that some passengers may be balking at the higher ticket prices. “Airlines have overreached,” said George Hobica, the founder of AirFareWatchdog.com.
Packed planes are a way of life for anyone who travels regularly. And for anyone who understands economics, fewer flights (less supply) and more demand (full planes) mean higher ticket prices.
But Teamsters union representative Kevin Currie, who occasionally flies to Florida to see relatives, never received the supply and demand memo.
“It’s getting ridiculously expensive,” said Currie. “There are more people flying right now, so shouldn’t their prices go down?”

Reporter Houawad then writes, “Of course, the airlines do not think that way. Since more passengers are vying for every available seat, they can keep raising fares and still fill their planes.”
Of course, no one thinks that way.

Some people, like Kevin Currie, just don't get it. The other issue is the airlines have cut back on the number of flights per day, due to operating expense, so they have partially created their own shortage of supply.
Years ago, when I first started traveling, (60 countries in 25 years) most aircraft were 30-50% filled to capacity, for every flight. No wonder airlines were losing their asses. Either way, the prices will rise due to demand.

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