Pax Behaviour

[arefixz]

Hello, It has been 3 weeks since I get to know AWS and playing it and here I found something intriguing.

I had an operation from airport A to B, and I am the only carrier by the meantime. I can only charge fare max of std+20% and if I increase fare by 5%, my LF(load factor) will drop over -50%.

Different situation for airport C to D, there is 5 carrier competing for that route (including myself) but it seems that we all came for an understanding, I can charge up to std+60% and my LF remain the same (70%). I started route with std+20% and I got 70% LF, on the next day my LF increase and I increase my fare by 10%, then LF reduced back to 70% and increase again day after. So I keep increasing fare and I think competitor also does the same (even now Im afraid to charge more because its too expensive almost std+80%  )

Do you guys also seems having same situation? Any suggestion how to maximize profit for my A-B operation? Both routes having image of 100% and company image quite decent. I guess this is how pax algorithm works, they encourage competition 

[schro]

It probably has more to do with the total demand on the route and how much of it you are supplying. The more unmet demand there is on a given route, the more elastic pricing becomes. Also, load factor is NOT a good measure of response (generally speaking) as it's a calculation based upon the number of seats actually sold, thus, comparing those across flights/routes/plane types is generally not a good idea.

From your situations described, for A-B, I would suspect that your flight(s) supply is(are) approximately meeting demand, as that pricing sounds about right for it.  For C-D, it sounds like you may have one flight per day on a very large route (say, 10x higher than what you're supplying), which will allow for you to do fairly high pricing even with competition. You will eventually hit a wall with those increases as well.

One of the finer points of the game is optimizing your pricing strategy for maximum profit, which does not always equate to the fullest planes or most passengers....

[arefixz]

For the C-D, supply by carriers is over 160% and yes, I supplied only 1 plane which only 1/4 of demand. Did you mean that everyone will be given equal portions for fair gameplay? Which means if carrier send lots of plane to dominate all demand and selling free seats, he still can't get his seats full?

[gazzz0x2z]

For the C-D, supply by carriers is over 160% and yes, I supplied only 1 plane which only 1/4 of demand. Did you mean that everyone will be given equal portions for fair gameplay? Which means if carrier send lots of plane to dominate all demand and selling free seats, he still can't get his seats full?

Well, plenty of parameters are used. But yes, the base is a share. If you have a 40-seater in a 160 demand route with 3 opponents that have high prices, you'll make a good profit. Much more than on a 40-demand route.

And note also that economics do play a role. When I had a base in Hamburg, I had similar demand to London City and to Beograd - but pricing high was far more punitive on the Beograd road. While I could set insane prices to London City, and still fill my planes, I had to stay low on prices to Serbia. Same demand, no opposition, same planes(ERJ145, IIRC)

[tdf42]

So when a someone sends their regionals  at equal capacity vs my 737 at a lower price point (not to mention a lower rated airline) I lose? I mean, how do I even know what they are charging?

[gazzz0x2z]

So when a someone sends their regionals at equal capacity vs my 737 at a lower price point (not to mention a lower rated airline) I lose? I mean, how do I even know what they are charging?

You don't know how much they charge. And you overall lose, but if you fly bigger planes, you might have a better CI, you might have lower costs per seat - allowing you to charge less for the same per-seat profit, etc. That's complicated.

Overall, though, it's called a "frequency attack". 600 demand, a company has 4 150-seaters, and an opponent lands with 8 75-seaters. Ouch. Happens to me from time to time. I'm still very profitable, don't worry for me. The drawback of a frequency attack is that you pay double slot costs, you eat more planes(very important outside HQ, as their numbers are limited), and you use smaller planes - with higher cost per seat. But it works well anyways.

Said another way, there is not one single proper correct way of playing this game. You can play small and safe, or big an risky. Both can be fun and enjoyable. Both have their qualities and their drawbacks. And depending on where you play, and your opposition, one - or the other one - can be better than the other one.

[arefixz]

Is it means that even competitor frequency attack your route and covers all demand, it wont affect you much as there is still pax loyally flying with you and pays good fare to you?

How about starting new route dominated by away carrier with supply over 150%, you means that we can still join in the route and gets some portion of demand flying with you for high price? We shouldn't afraid of routes dominated by other carrier as there is always pax will fly with you when opening new route?

[gazzz0x2z]

Everything counts. So while some part of the pax will stay loyal, others will switch.

Yes, you can join routes covered 150%. Well, short routes, that is. You won't fill your planes(unless flying vastly smaller planes), but still can do some money. On long routes, it's usually not a good idea.

[arefixz]

Thanks! It helps a lot. My competition now going tense 

[MRothschild]

Thanks! It helps a lot. My competition now going tense 

That's the spirit!