Why do AIRLINE Co. go Bankrupt? Instead of price drop?

[Triumph]

Originally posted by: freemanteo

Originally posted by: kami333
And don't tell me you guys pay full fare...

Paid $550 for round trip to Japan.

I'm sorry, please tell us how you got that price??



noone answered my question, you guys mean that a company would rather lose more money without much passengers than dropping prices and increasing passengers?

I mean it is better to have empty cabins in airplanes than to cut prices? If my example is not exaggerated, why is it not feasible to loss less money by dropping prices? It would not only fill the cabins, but increase customer circle!

For example:
Empty cabins= $1billion loss
Full cabins= $300 million loss

Because it just isn't that simple. First of all the airlines don't know the magical formula for calculating how much of a price drop will attract how many customers. Lets simplify it. If the current price, even at a loss to the airlines, is $100, lets say that 10 people will buy the tickets at this price. Gain to airlines is $1,000. Now if they drop the price to $80 per seat, and 11 people now buy the tickets, the airline is only making $880. The underlying principal I'm trying to get across here is the "Invisible Hand" theory. What this means is that no one person can know exactly how the market responds to changes in price (unless you poll every single person in the country and ask them "How much will you pay for this particular flight?) The only thing that really knows is the market itself, as if it were guided by some omnipotent "invisible hand." This would probably be alot more clear if you had had some sort of introduction to economics course. There are alot more factors that go into making price determinations, that's why people have doctoral degrees in economics.

 

[freemanteo]

Triumph, you are assuming something out of the ordinary, my thoughts are simple and i know nothing economics, but are'nt most people looking for free stuffs or best deals?

If an airline charge lowest prices everyday than its competitors, i donot see why as a consumer that people would not choose them to fly with.

Everyone know why Walmart is dominating the market here in Texas and wherever their presence is, because of their everyday low prices with very good customer service. They know what the people want and they offer that, plain and simple.

Many People with PHDs and Masters in Economics may crack their head over "What Customers Want"

but the intelligent People with PHDs and Masters in Econimics know and realise "What Customers Want" sooner

If Oxford or Harvard have 100 PHD graduates this year, does'nt mean all 100 are the top of the class, i'm sure there is the Best 10% and the worst 10%.

I'm not sure what i am talking about, but just shoot me!

For example, the in-thing now is to buy a $3000 Armani Suit for $300 (yes even to the rich and famous) Why pay more, hmmmm?


"Life is simple, Men made it complicated" Why, cos we think we are too smart.

 

[Triumph]

Originally posted by: freemanteo
Triumph, you are assuming something out of the ordinary, my thoughts are simple and i know nothing economics, but are'nt most people looking for free stuffs or best deals?

If an airline charge lowest prices everyday than its competitors, i donot see why as a consumer that people would not choose them to fly with.

Everyone know why Walmart is dominating the market here in Texas and wherever their presence is, because of their everyday low prices with very good customer service. They know what the people want and they offer that, plain and simple.

Because a company can't sustain a business model like that for long enough to wait out the competition, especially when you're competing against other giant corporations. Wal-Mart is succeeding over mom-and-pop operations. American Airlines is going against Delta, United, Continental, etc. all multi-billion dollar corporations. You're asking to make it simple, and I'm telling you that it simply isn't.

 

[UDT89]

i see flying just becoming too expensive to be a source of transportation. Teleporting needs to come out.

 

[DanTMWTMP]

Originally posted by: UDT89
i see flying just becoming too expensive to be a source of transportation. Teleporting needs to come out.

teleportation kills you, and makes an exact copy of you on the other side..... ...crazy i say...

 

[freemanteo]

Originally posted by: Triumph

Because a company can't sustain a business model like that for long enough to wait out the competition, especially when you're competing against other giant corporations. Wal-Mart is succeeding over mom-and-pop operations. American Airlines is going against Delta, United, Continental, etc. all multi-billion dollar corporations. You're asking to make it simple, and I'm telling you that it simply isn't.[/quote]



Walmart is also suceeding over Target, Kmart and including supermarkets like Albertsons, Brookshires, Kroger and many more.

All the above mentioned are not mom-and-pop operations.
Research and study is not necessary because NO COMPANY donot know that value and quality attracts the majority market.

Knowing and realising are different, that sets apart the successful and unsuccessful or well you know what i mean!

 

[kami333]

Originally posted by: freemanteo

Originally posted by: Triumph

Because a company can't sustain a business model like that for long enough to wait out the competition, especially when you're competing against other giant corporations. Wal-Mart is succeeding over mom-and-pop operations. American Airlines is going against Delta, United, Continental, etc. all multi-billion dollar corporations. You're asking to make it simple, and I'm telling you that it simply isn't.

Walmart is also suceeding over Target, Kmart and including supermarkets like Albertsons, Brookshires, Kroger and many more.

All the above mentioned are not mom-and-pop operations.
Research and study is not necessary because NO COMPANY donot know that value and quality attracts the majority market.

Knowing and realising are different, that sets apart the successful and unsuccessful or well you know what i mean![/quote]

Compared to a few years ago, prices have come down.
By comparing airlines to Walmart, I think you are missing a valuable point, that stores can always sell more to make up for lower profit margins while airline seats are finite, for ever airplane they add to a route their operating costs go up dramatically.