Dear MEL Topic Readers,
Is it worth it to fly an ultra-low-cost airline?
One of the most mysterious prices is airfares. When you fly from A airport to B that is serviced only by one carrier, you most likely pay a standard economy-class fare, which costs like a first-class fare. But when you search for a lower fare well in advance in a route where multiple airlines compete, you may have a better chance to find a heavily discounted ticket, like below $200 from London to New York. However, the fare goes up as high as the standard fare if you book closer to the departure date. Does the cost to fly an airplane change so much? In fact, the only cost variance airlines have to bear for the same route is fuel, whose prices change time to time while other costs, such as staffing, operation, and depreciation are almost fixed. So, what makes airfares different so much is competition and demands. Low-cost carriers offer bargain prices to pack as many passengers as possible and charge baggage fees and sell in-flight meals and drinks during the flight. If no one checks in baggage and buys any drink or meal, the airline makes no money or lose some. Big airlines have upper-grade seats that generate most of their revenues. So, if there are no business class passengers or generous economy class passengers booked their seats at the very last moment, they are in trouble.
Enjoy reading the article and learn about airlines’ dynamic pricing mechanism for competition.