Crazy Pricing in Airlines Industry
Tuesday, May 01, 2007 Permanent link to this post
Have Airlines Lost Their Mind?
I have heard stories of Airlines doing some really crazy pricing. However - I had never came across on such masterpiece face to face - till this week.
I was looking for flights from Detroit to Tulsa, OK. I was not sure of my return date so I tried looking for one-way flights. Horror of horrors - this is what I find. Look at the screenshots below. The first screenshot is for a return flight - leaving May 10th and returning May 20th. The second screenshot is a one way journey (exactly same as the first half of the return journey).
Screenshot 1: Return Flight, Price: $401
Screenshot 2: One way flight, Price: $730
Note that the two flights use exactly the same setup for the common part - same flight no. So - at any rate, the return flight should be expensive than the one way - its the same flight plus some more. However, the reality is completely upside down. The on way ticket is almost double in price than the return ticket that has the one way ticket embedded in it. One might as well buy the return ticket and then throw away the return part of the ticket.
I can't think of any justification for it - it just does not make sense. Airline industry it seems uses all kinds of sophisticated revenue management systems, yield management systems etc etc. - and after than if they are coming up with this amazingly crazy pricing then something is surely wrong somewhere.
PS> Northwest has been bleeding money past few years and it under bankruptcy now. See any lconnections??
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I have heard stories of Airlines doing some really crazy pricing. However - I had never came across on such masterpiece face to face - till this week.
I was looking for flights from Detroit to Tulsa, OK. I was not sure of my return date so I tried looking for one-way flights. Horror of horrors - this is what I find. Look at the screenshots below. The first screenshot is for a return flight - leaving May 10th and returning May 20th. The second screenshot is a one way journey (exactly same as the first half of the return journey).
Screenshot 1: Return Flight, Price: $401
Screenshot 2: One way flight, Price: $730
Note that the two flights use exactly the same setup for the common part - same flight no. So - at any rate, the return flight should be expensive than the one way - its the same flight plus some more. However, the reality is completely upside down. The on way ticket is almost double in price than the return ticket that has the one way ticket embedded in it. One might as well buy the return ticket and then throw away the return part of the ticket.
I can't think of any justification for it - it just does not make sense. Airline industry it seems uses all kinds of sophisticated revenue management systems, yield management systems etc etc. - and after than if they are coming up with this amazingly crazy pricing then something is surely wrong somewhere.
PS> Northwest has been bleeding money past few years and it under bankruptcy now. See any lconnections??
This is not the first time that I have heard of such a pricing strategy. If you fly one way, then you may be returning on a competitor's plane and thus contribute to their profits. By purchasing a return ticket you are denying the airline's competitors the opportunity to profit from your business.
Now having said that, this strategy is not a long term one and is not likely to result in much profit for the organisation that is employing it. I don't know enough about the US air transport market to comment further.
-Dr Bob 127
Now having said that, this strategy is not a long term one and is not likely to result in much profit for the organisation that is employing it. I don't know enough about the US air transport market to comment further.
-Dr Bob 127
Comment posted by 
: 01 May, 2007 02:06
: 01 May, 2007 02:06
Thanks Dr Bob for your comment. Your explanation is at least rational at some level. However, considering that Northwest is fighting for survival - its strategy really should be to extract every last bit from the market and not focus on denying revenue to competitors. In any case, as Detroit is a Northwest hub, even if one buys one way into Tulsa, its quite probable that the return will also be in Northwest.
Sanjeev
Sanjeev
Hey Sanjeev
Your "research" is really mind blowing....
Really this could be a fantastic area for reseach for some one interested in pricing mechanisms..
Gaurav Bansal
Your "research" is really mind blowing....
Really this could be a fantastic area for reseach for some one interested in pricing mechanisms..
Gaurav Bansal
Thank you for your comments Gaurav. Pricing is not my area of research but I just thought that the context for this post was crazy. I am quite happy in my business value of IT research...
Thanks again for visiting my blog,
Sanjeev
Thanks again for visiting my blog,
Sanjeev
Is it………? Really surprising. Now companies are adopting different techniques for their revenue generation. As Dr Bob 127 has mentioned above that may be the reason behind such type of pricing system. Whatever it may be but your research is notable. Everyone should have more or less idea about this.
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This is a usual practice in most airlines operating in western countires. I have thrown return tickets a couple of times as one way would cost USD 800 and return would cost USD 200 and I need one way alone. There are several such funny stuff in international travel ticketing also.
Fortunately, it is not so in Indian domestic market.
Fortunately, it is not so in Indian domestic market.
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