C´alculo de la velocidad de disoluci´on

Yield management (identified in 3.8.2 above) has enabled the airlines, especially the network airlines, to develop complex fare structures designed to maximise revenues on each flight through price discrimination. Airlines try to sell as many seats as possible at the highest fares, those charged for unrestricted travel, and as few seats as possible at the lowest discount fares. Passengers paying the highest fares obtain the advantages of flexibility and last-minute access to seats. Passengers can book seats just before the flight, change their reservation without penalty, and obtain a full refund if they do not use the booking. Passengers travelling on most discount fares, in contrast, typically have to book seats several days or more before the flight, have to pay in advance for their seats, cannot change a reservation without paying a penalty, and cannot obtain a cash refund if they cancel their trip. Although business travellers can use some discount fares, the cheapest discount fares frequently have a Saturday night stay requirement to discourage business travellers from using them. To save seats for passengers willing to pay for unrestricted fares bought shortly or immediately before the flight, airlines limit the number of seats made available at the lower fare levels. 236) 237)

According to Levine ME, unlike the low cost airlines, the network airlines have relatively little interest in attracting travellers who insist on paying low fares for air travel, even though the network airlines do sell many discount-fare seats. Network airlines structured their operations so as to attract travellers willing to pay more for better and more frequent service. If an airline charges higher fares to those travellers, it may be able “to generate sufficient revenue to provide the product, but no more than that if competition is effective”. 238) The airlines’ yield management systems mean that passengers on the same flight will have paid different fares, depending on how far in advance they made their booking and how many restrictions they were willing to accept in return for a lower fare. No airline has been able to maintain a simple fare structure. The discrimination in fares also reflects the willingness of business travellers, but not leisure travellers, to pay for frequent and convenient flights. 239) Low cost airlines, however, have less complex fare structures than the network airlines. 240)

Although network airlines serving a market allocate different numbers of seats to each fare level, they tend to charge similar amounts for each type of fare offered in a market (for example, 21-day advance-purchase fares and unrestricted economy fares). Each network airline usually matches the fare levels offered by its network competitors in a market, although not necessarily the number of seats made available at each fare. 241)

An airline that has a competitive advantage in a non-stop market will be able to sell more seats at unrestricted fares and so can afford to make fewer seats available for discount fare passengers. A hubbing carrier is able to offer a service advantage relative to a non-hubbing carrier that permits it to attract a relatively larger portion of time-sensitive (primarily business) travellers, serving to raise its average yield. Even if both airlines serving a route have a hub at one of the endpoints, the airline with a competitive advantage can obtain significantly higher yields. As a result, even if two airlines charge the same fares in the same non-stop markets, one airline can obtain higher average fares owing to the fact that it has a better mix of traffic. 242)

3.10.8 OTHER FACTORS CONTRIBUTING TO FARE DISPERSION

The TRB stated that the airline industry has been prone to wide cyclical swings. Excess capacity has been a recurrent problem for the industry during recessions and shortly afterwards. Excess seat capacity has declined during the decade, as indicated by average load factors, which rose from 60 percent in 1990 to nearly 70 percent in 1998. Low load factors early in the decade reflect the drop-off in demand during the 1990 to 1991 recession, coupled with expanded capacity. More recently, higher load factors reflect an industry with high demand and intensive use of capacity. In the past (notably in the early 1990s) whenever failing airlines attempted to generate revenues from underused capacity by sharply lowering fares, other airlines followed suit by matching their fares. The resulting fare wars benefited travellers in the short term. However in order for well-run private airlines to survive and prosper, fares must eventually rise to levels sufficient to recover long-term costs and keep capital in the industry. Incumbent carriers experienced large losses during the recession of the early 1990s, but have since experienced positive operating profits, often at record levels. 243)

The TRB concluded that the increases in unrestricted fares observed in recent years have been at least partly justified as a means of restoring the industry’s total returns after the large losses it suffered in the early 1990s. 244)

As a result, while observed increases in the fares charged price-inelastic travellers may be a manifestation of airlines exercising their market power, the extent to which these fare increases have been excessive is unclear; that is, the extent to which increases have reflected the exploitation of this market power. The TRB in the USA stated that the only sure check against such exploitation is to ensure that opportunities for competitive entry are made available and not impeded. 245)

From the conclusions of the TRB in the USA it would appear, however, that the only sure check against exploitation is to ensure that opportunities for competition exist. In the absence of such fare analysis in the domestic market in South Africa, the focus should be on the promotion of competition to serve as an automatic check against the exploitation of passengers. Further study would be necessary in South Africa to identify the overall trends with regard to fares and yield of air travel in South Africa as well as the determination of the factors that influence such trends.

3.11 THE EFFECT OF PRICE DISCRIMINATION ON ECONOMIC

WELFARE OF CONSUMERS IN THE DOMESTIC AIRLINE