Friday, February 29, 2008

Selling Seats

Yesterday, to celebrate their 12th birthday, WestJet had a pretty good seat sale on routes in Eastern Canada offering fares between Toronto and Ottawa or Montreal for as low as $12. Some other routes were only $39 each way. While they still added all the surchrages such as taxes, airport improvement fees, NavCanada fees and the security tax, the flights were still a great deal. Air Canada matched most of the fares. Combined, my girlfriend and I bought a total of 5 one way flights for roughly $420.

Three of these were flights that we knew we needed to make in the next few months so we would have eventually bought tickets. Two legs were a flight that I was probably going to make, but hadn't completely committed to yet. The sale solidified my decision. Although, for that particular trip I booked on WestJet before I knew that Air Canada had matched the prices. Air Canada had flights at more convenient times, so I would have picked their flight had I done some more research.

The excitment of getting a pretty good deal aside, this raises some really interesting issues about the economics of the airline industry. Aircraft are complex, expensive machines. They are operated by skilled crews who are paid a relatively comfortable salary. Yet, with a sale like this, the actual cost of the airfare from Toronto to Halifax is less than the cab ride home from the airport!

This was just a one day sale. Fares that low are not sustainable as the former airline Jetsgo showed. But this does raise some interesting questions. What is a good price for airfare? Most customers will argue that airfare should be lower, yet, airlines in Canada go bankrupt on a regular basis. In fact, there's an article in the Globe & Mail's Report On Business on Air Transat and how it's amazing that an airline has survived for 20 years in Canada!

This issue is too complex to examine in a short blog post. In fact, airline executives with MBA's haven't managed to get it right over the past few decades. But, on the surface at least, the public's desire for low airfares generally conflicts with pilots' desires for a high income.

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