Skiplaggers are generally the savviest travelers and often the airlines’ best customers. Yet frequent flyers buffeted by airline fees, poor service, delays and cancellations tend not to care much about the airlines’ troubles. So, hidden-city ticketing lowers the yield they receive from each seat and complicates what is already a small-margin business.īut, Harteveldt argues, airlines overbook because they know some won’t show up so it is unlikely the seat will fly empty. Webber explained the impact on revenues saying skiplagging means airlines cannot maximise revenues because, had they sold the seat directly, they would have probably received a higher fare. Tony Webber, CEO of aviation research company Air Intelligence and former Qantas chief economist, says lawsuits like the one filed by Lufthansa are a scare tactic. From an economic point of view, it makes perfect sense to charge lower fares in the Boston-Las Vegas market even though it is further than Houston in miles, especially if the competition is charging $199 for a non-stop flight,” he says. They are very different markets when it comes to both competition and sensitivity to pricing. Boston-Houston is a business market, which means higher fares. “Take Boston to Las Vegas, a leisure market which is more price sensitive. Peter Belobaba, principal research scientist at the MIT International Center for Air Transportation, says this kind of pricing is found all over the world. In my discussions with airlines, they say they don’t want to lose market share and will take a calculated risk.”
It all depends on the competition, and that is why airlines strategically lower fares in some markets and not others. “If airline A has a low-fare competitor, they will match if not, they charge a premium. “But when an airline puts out stupid airline pricing and the fare into a hub is nonsensically high, it is almost like airlines invite hidden-city booking.”Īt issue, says Harteveldt, is the logic underpinning airline pricing, which can appear incomprehensible to customers.
That is what business is all about,” says Harteveldt. “I fully understand, as an airline analyst and business person, why airlines extract as much as they can where they have leverage.
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