Route Pricing

[czwakiel]

How does route pricing affect other airlines on your route?

I have a route between between a city pair. There are two other airlines on that route. They charge a fare of approximately 320~.

I started on that route and am running a 1x frequency service for a fare of 700~ at 97% load.

Does this affect the other airline on that route and the profit that they make?

[CHR]

Yes. Whenever you increase the number of seats you have filled (i.e. increasing load factor or total capacity), you decrease your competitor's load factor. Your competitors will have to decrease their fares to fix the load factors, which in turn decreases your own load factor. With every adjustment down, everyone's load factors will increase. You then end up slowly moving the price to a point where everyone has 100% (or someone gives up changing it).

On a side note, the reason you can charge a higher fare (assuming your competitors are charging the most they can) is that you would have a lower capacity on the route - either smaller plane or your competitors are running multiple frequencies - this still has an effect (albeit smaller) on airlines with lower fares.

[pseudoswede]

On a side note, the reason you can charge a higher fare (assuming your competitors are charging the most they can) is that you would have a lower capacity on the route - either smaller plane or your competitors are running multiple frequencies - this still has an effect (albeit smaller) on airlines with lower fares.

Or the competing airlines have grossly underpriced the fares.