So far this year, airlines have raised prices five times (or five-and-a-half times, if you count the JetBlue-initiated hike of Oct. 9 which all other airlines bailed on except for JetBlue).
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Most Hike Attempts Failed
Either way, lots of hikes, right? Well, not necessarily. Not when you consider airlines attempted to raise prices twenty times this year. So what happened? Here are some answers.
Four Reasons for Failure
There are several reasons for the airlines’ failure to push through the hikes they wanted but these are the big four.
Consumers’ wallets: The airlines walk a tightrope on travelers’ discretionary income, always probing to find the most passengers will pay without spilling over into ‘we’d rather stay home’ territory. They know that even a one percent hike in base prices could potentially depress demand and they will avoid that.
Southwest influence: The remaining three legacy airlines – American, Delta and United – still tiptoe around Southwest and its overlapping routes. If Southwest drops out of an airfare hike (or doesn’t join in), that hike is usually doomed.
Business travel factor: Many hike successes can be attributed to last-minute business travelers, thanks in part to corporate managers who have loosened purse strings on travel budgets.
Capacity controls: We are in the era of the ’90 percent load factor’ business model – but filling those empty middle seats still requires discounting, especially on low demand days like Tuesdays and Wednesdays.