Airline Pricing, Hurricane Irma and Fairness
Southern Florida is evacuating. Most of Florida is evacuating. My parents as far North as Charleston, South Carolina are evacuating. Hurricane Irma is a big deal.
For many people, their evacuation plans include flying somewhere safe. This could be a windfall for the airlines. High demand with limited supply provides a golden opportunity for airlines to raise prices. They won’t be able to serve everybody, so why not sell to those with the highest willingness to pay. It’s almost like they can auction off those seats to the highest bidders. After all, pricing is about charging what customers are willing to pay.
Wow that sounded callous, mean, and even stupid. Although it is possible for airlines to raise prices on these flights, this action would dramatically upset their customers. I’m a loyal American Airlines flyer. If I saw American was charging $3,000 for a coach seat out of Miami, it would make me furious, especially if I had to buy one at that price. I would switch airlines for all future purchases. I would find ways to fly less and drive more. They would absolutely lose my loyalty.
This is true for many more people than just me. Hence, the airlines should think about the lifetime value of a customer. Making a few extra dollars during this disaster could cost them dearly in the long run. The logical decision is to not gouge travelers leaving Florida. Yes, it’s the moral decision too, but I prefer to think in logic.
This is exactly what the airlines are doing. JetBlue has capped the price of every one-way direct flight out of Florida through September 13 at $99. American Airlines has done the same. Delta has capped their flights at $399.
Fairness is in the mind of your buyers. In this case, many buyers would think it unfair to gouge people trying to leave the hurricane path. The airlines are absolutely doing the right thing.
But, how does this compare to the Super Bowl? Flights into the Super Bowl city are much more expensive because of supply and demand. Hotel rooms in the Super Bowl city are often 5 to 10 times higher than normal because of supply and demand. A lot of people want to go to the Super Bowl city, there isn’t enough supply, and so only those with the highest willingness to pay actually go. Is that fair?
Fairness is in the mind of the buyers. This happens every year. Buyers expect this from the travel industry. Most importantly, this is not a matter of life and death.
Your lesson, supply and demand does matter. Willingness to pay does matter. But so does the lifetime value of a customer. If your short term windfall causes you long term disloyalty, think hard before taking advantage of a situation, especially a disaster.
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