Ticket Pricing

[fazon]

Airline ID: 30293
World ID: 130
Current world year: (Late-) 1990
Current bases: Toronto Pearson
DOC: 477 000

For example, lets say Airline A, Airline B, and Airline C all have a route from Toronto to New York. These are the prices, loadfactors, and market shares:

A - $100 / $100 / 75%
B - $700 / %100 / 20%
C - $1000 / %90 / 5%

Lets also say that $700 is the most amount of money an airline can charge before the load factor goes below 100 (Airline B)

Which airline would profit the most? I would think B would but does market share make a difference? And lets say A profits the most, in order to compete with that airline, what should Airlines B and C do? Should they charge even less, the same amount?

Thanks.

[pseudoswede]

The only way airline B can charge  €700 on a route and still maintain 100% load is if...

* Airline B is using a tiny plane.
* Airline A is using a bigger plane and is severely undercutting its own optimal fare.

Until we know what kinds of planes are being used, no one can make any correct guesses.

[fazon]

But whos making the most profit? I would guess Airline B but the market share is mainly on Airline A.

[Severnaya]

But whos making the most profit? I would guess Airline B but the market share is mainly on Airline A.

We can't tell unless you're telling us which planes are in use.

[CHR]

Generally, in AM the following statements can be made about routes:
A bigger (seat capacity) plane will have lower fares.
A bigger plane will make more money on a specific route.
More frequencies will result in lower fares for that airline.
More frequencies will make more money on a specific route.
However, both bigger planes and extra frequencies will not make a proportionally high amount of money.*
The most money will be made when an airline is operating at the maximum fare to allow 100% loadfactor.

*i.e. 2 frequencies (with double the time) or a double capacity (with double the cost) aircraft might make 1.25 times the profit

I hope this answers your questions about the routes in question. However, specific situations have a number of variables which will come into play. One of the most important of these is competition. More competing airlines means you take less of a (relative) profit hit (as fares are already low) when using large aircraft, making them more viable.

[fazon]

The most money will be made when an airline is operating at the maximum fare to allow 100% loadfactor

Thanks, that cleared it up for me.

[pseudoswede]

The most money will be made when an airline is operating at the maximum fare to allow 100% loadfactor

Thanks, that cleared it up for me.

CHR's statement is not 100% true.

Since you don't seem to want to tell us what kind of planes are involved...

Airline X: 450-seat widebody @ €100 with 100% load factor
Airline Y: 10-seat prop plane @ €700 with 100% load factor

Excluding maintenance costs, which airline makes more money?

[fazon]

Airline A = BAe-146-200
Airline B = DHC-4 Caribou

I didn't say what kind of planes because it's not just on one route, it's on several routes.

[CHR]

I will clarify by adding: With the same aircraft, the most money will be made with the maximum fare allowing 100% loadfactor.

It was explaining what fare you should try and aim for (assuming you have already picked an aircraft to use). If you have an aircraft, you want to try and get 100% LF (but with the highest possible fare), as opposed to 90% LF or 100% LF with a lower fare than maximum.

[fazon]

But I don't see what difference it makes...

Is it the fuel/maint. costs?

[CHR]

Maintenance is a monthly cost which is applied regardless of how much your plane flies. The fees included when you do each route are costs specific to that flight, like fuel, airport fees (not gate costs, takeoff/landing fees) etc.