Thursday, August 10, 2017

The Culture Of Demand Chapter 5: Ignoring The Passenger Supply Stream Is Silly.

A long time ago passengers were considered an infinite supply without limits to airline growth. It was just a matter of time before passenger demand pushed airplane supply forward. However, the passenger supply has a limit and it now demands its participation in whole scheme of things. The “industry” somehow knows what’s best for its passengers when presenting its profit making plans. It has failed to recognize passengers have a dog in this fight.

Once again pitch is mentioned as the battle line between the Airline and its potential customers. The airline sets a pitch standard thus forcing its configuration by seat count scheme giving the passenger little to squawk about, because they want a cheap ticket. The airlines produce supply by seat count and the passenger demands a low seat price. Everyone is happy? That is how supply and demand is not supposed to work. Passengers should cause a demand for a supply of tickets which competition is built upon. However, it won’t work that way if airlines are seeking a profit solution over the backs of its customers, as it approaches the 30” pitch line in the sand.

An old sentiment arose with the three class configuration. Economy paid for the flight, first class gave the trip its profits and Business class was a bonus to the airline. Essentially, First class seats were for stockholders and the like. When operational and fuel costs rose, the number of economy seats had to increase much to the delight of low fare paying travel addicts. The squeeze towards 17” wide seats with a 30” pitch arose to pay for the costs of current single aisle routes in play.

A new conundrum has arrived. What happens when you don’t have a first class or even a business class on a LCC operation like Ryan Air? How does a profit arrive at a destination when everything is an economy seat?  Ryan Air has opted for ancillary profit centers which won’t fly, as one solution for its lack of high end ticket prices. It will simply make the equivalent first class revenue replaced by its other ancillary products it will be offering.
    
The case in point, is every terminal has a seating area near the gate before boarding. The long waiting passengers are in an anxious situation and going to a restaurant or shop causes additional tension as a passenger is always listening, watching and rushing to get back to their terminal boarding area seat. A proposal is offering gate kiosks for passenger snacks, meals, and other services for the trip. Everyone forgets something and it’s too far or risky to walk for trip supplies. Have a credit card, the airline has a machine or place to spend your slippery money.


You could be renting a car for your destination from the Airline
Image result for airplane passenger gate seating area
So what’s an airline to do when it has only economy seats at $99 each? The 8 or so First or Business class seats costs four times the economy class seats. If economy class is around $99, then the up class seat will be around $400. Times that number by 8 and the airline must find another $3,200 in revenue for the flight. The first class space could hold about 12 economy seats and add a stretch of several more rows in the back and viola the airline has about 20 additional economy seats at $99 each. Now the airline only has to make another $1,200 dollars with its terminal point of sale machines. With two hundred single aisle customers in waiting with carry on under tow, it would only take about a $6 transaction from each customer buying snacks, food or even a motel room/car rental before loading. Having a credit card spends money fast and it would be common for a $40 dollar run up before boarding with all kinds of Airline add-ons available. No First class seats profit no problem. The culture is changing.