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I think it's basically free to fly -- if you buy a $200 airline ticket, you are using $200 worth of fuel (total fuel / airplane capacity), aircraft depreciation, crew costs, etc. The airline can only make money because they figured out how to sell someone else a $300 ticket for their $200 worth of stuff. It's a precarious model, because if they sell you the $200 ticket but don't ever sell the $300 ticket, then they just lose money. Once the boarding door closes, there is no way to ever gain money on that flight. The "gouging" is just to appeal to the truly cost sensitive; people with no brand loyalty, time constraints, etc. If you don't want a soda, a checked bag, a seat assignment, and the option to choose from 10 different times of day to leave... but do want $50 in cash... they have you covered. It rubs people the wrong way, but people "sort by lowest price first", not by "lowest hassle first", so they have to account for that somehow. (Tangent: I never really understood this. I feel like air travel would be way smoother if people checked their bags instead of fought each other for overhead bin space. They should charge for the bins, not for the cargo hold. But I guess that's too hard in practice.) If you had an airline that just charged actual cost + desired profit for a certain load factor, the ticket would be $1000. Then someone else would show up and charge $999 because they can pay for a slightly less well-trained flight attendant. Then someone else comes along and puts the rows of seats 1" closer together. Eventually the price is what we pay today, because all that actually happened. I think the industry is so hyper-optimized that it's basically "free" to fly; you're just paying for transport at cost, or even less than cost if they have done their yield management correctly and you got the lowest fare on the flight. That's why the industry is so sensitive to disruptions -- it's balancing on a razor thin margin, because there are competitors ready to make $1 less to get your butt in their seat. Anyway, I think your assertion about a silver platter cornered market is simply wrong. Flying is ridiculously inexpensive compared to the costs. As a comparison, get your ATP certification, buy a 737, and fly your friends around in it. Pretty expensive compared to a ticket on Southwest! |
What about in-flight food and alcohol? In-flight wifi/movies/media? Does Sky Mall pay a commission? I'd be curious how much all of those things add in revenue after the door closes.