American Air President Says Airlines Should Price the Way Hotels Price

[Jester]

In a sense most airlines already practice pricing differentiation insofar that all seats are not priced the same... last might walk-up fares will nearly always be much higher than 21-day advanced purchase.  Airlines already charge based upon how strongly someone wants to travel depending upon immediacy of need, which is very different from say a cable company who charges the same rate even if the consumer would pay $200/month vs. a consumer who would pay $50/month for the same service based upon their individual utility maximization.
 
However, product differentiation is a seperate issue as air travel has become a homogenous good, especially whenever there is a connecting flight, and why price has become the predominate factor in the consumer's decision.  The trick is to make a homogenous good different with on-time performance, safety (real or imagined), customer service, lost bags, and desired flight times, as differentiation within the same flying tube outside of first class becomes problematic.  I don't view the article as a matter of product differentiation, but rather market segmentation, as there are price sensitive travelers who aren't concerned about middle seats, free upgrades, mileage awards, but just getting there sometime... pretty much the Spirit model.

 

[topDawg]

At the end of the day, the coach pax who pay Ritz Carlton prices could conceivably be sitting next to pax who pay Motel 6 prices.  Or does Scott want to carve out a Motel 6 cabin totally separate from the Ritz cabin? And then maybe a Courtyard cabin somewhere in the middle.  There will be a lot of bulkheads on that plane.
 
I don't get it, other than he's basically saying they want to unbundle as much as they can do start offering pricing to satisfy both the Spirit Airlines crowd and the VFF/legacy/premium crowd?
 
I, like many AA/US long time FF's, have flown on the unbundled pricing carriers like Spirit, Frontier and Easyjet.  I get the model and going in with eyes wide open, I'm prepared for it and plan/budget accordingly.  But I far more appreciate the pricing that AA gives where there's little more i have to think about ponying up.

 
correct. 
 
Delta/American are doing the same thing, it is going to have more to do with fees and seat selection more so than the hard product (example, there won't be a section of 27-28in pitch coach on Delta/American) 
 
The idea is that a person buying a ticket 6-12 months out lowest price on the market ticket shouldn't be getting a better seat than the last minute 10x+ price walk up fare ticket. Also the lowest fare classes will have to pay more fees than the higher fare class. I personally think its about time for the airlines to be doing this.