bcworld

How can you "ship" a service?

Vash the Stampede

You sure about that? Qantas was privatised in 1993. It's not even part-owned by the government, and receives no government subsidy.

On the contrary, its greatest competitors are the foreign airlines which are heavily subsidised by their own governments (eg. Singapore Airlines and Emirates).

WillBlack

One could pop it in the post or send an Electronic ticket

bcworld

Pop what in the post? A 747 flying from Sydney to London and back?

The service you are paying for is an Australia to UK return therefore you pay the required amount in the market in which that service is provided - Australia. If you wish to buy that from the UK, the UK agent can "ship" you the tickets if you wish.

WillBlack

A ticket for a flight from Aus-UK-Aus. As you say, if I buy that from a UK vendor, I will pay the $A price not the £UK price.

We were discussing why a UK-Aus-UK ticket costs less than an Aus-Uk-Aus ticket. The anomaly is that the services are physically equivalent (ignoring head / tail winds) but the price is not, whether using the same carrier, equivalent national carriers or the cheapest from each first departure.

So which causes the anomaly; competition or subsidy?

bcworld

Potentially neither. As with any other business the airline sets the prices for its products at a level that optimises the number of product(seats) it sells in each market. So say an airline just used a single plane on its London - Singapore - Sydney - Singapore - London route. A massively complicated computer program is used to over time, learn about load factors on each segment of the journey, where passengers originated etc. Eventually the airline will determine the optimum amount to charge in the London, Singapore & Sydney markets for each segment of the flight and how many seats to make available to each market in order to ensure that they get the highest possible load factor / profit. This is after all the point of running a business. If the airlines have seen Aussies bite their hands off at $1500 they are hardly likely to offer the seats at $1200 - would you run a business that way?

Sometimes consumers here can take advantage of this by booking the Aus - Singapore - Aus and Singapore - London - Singapore flights seperately and finding that the cost of those 2 flights added together is less than Aus-UK-Aus on a single ticket. This often used to work out cheaper as the A$ was strong and converting from Singapore dollars was lucrative. The A$ is now less strong and this option isn't always appropriate.

WillBlack

I take your point about optimizing profit but I say there is a missed cricial piece from that line of arguement:

The price on on the same carrier, say BA, is different UK-Aus-UK from the price Aus-UK-Aus when currencies are converted (and that has long been the case).

If that price difference is due to the number of passengers then we would need to see that there are less passengers going UK-Aus-UK compared with Aus-UK-Aus on the same date. In other words there are more passengers going Aus-UK-Aus than going UK-Aus-UK.

Seems odd especially considering that there is a bias over the entire year towards cheaper prices on UK-Aus-UK itineries. Odd because while there is some seasonality any increase in one season should be balances by a decrease in the counter season.

I rather incline to the view that there is something anti-competitive at work. A subsidy on fuel the UK side and tax revenue protection on the Aus side.

bcworld

No, it's not that there are more passengers necessarily, it's that there is more demand. The airline must ensure therefore that there is sufficient seat inventory for passengers from each market to be able to move relatively freely therefore different numbers of seats are made available to passengers in different markets, and also priced accordingly.

That can result in this situation:

You are in London and try to book LHR-SIN-LHR for certain dates however the airline tells you that there are no seats on the SIN-LHR sector for the date you want. However I am in SIN trying to book SIN-LHR on the same date and I am able to book a seat, because the available seats are in the SIN inventory and not available to passengers originating in London.

Differential pricing is one component of managing available inventory.

Consumers in the UK can use this to their advantage and if they are smart can probably pay even less than the standard UK-Aus-UK price by starting in a European city and backtracking to London - it sounds crazy, 2 extra flights included in the trip but the overall fare is cheaper. Australia's isolation make this impossible in the opposite direction.

Complicated - MUCH! I have a friend who works for Singapore Airlines and he explained all this to me once and its one heck of a head****.

WillBlack

Perhaps you have presented the key to the riddle: If there are more passengers on the Aus-SIN sector than the SIN-UK sector (for example Aussies travel to Asia and not beyond) then there is more demand, and more profit, in the busy sector. While there is still profit in the SIN-UK sector, airlines will fly the sector even if it is less profitable than the busier sector. So the aeroplane from Aus will stop at SIN but fly on to the UK.

I still have difficulty with this line of argument because an aeroplane originating from the UK will fly the SIN-Aus sector both ways just as an aeroplane originating from Aus will fly the Aus-SIN sector both ways.

I smell a rat. Something hidden under a bushel.

WillBlack

If you want to travel on an airline where the return fares including charges are cheaper Aus-UK-Aus than the fares UK-Aus-UK then consider this airline:

Air Asia

2009/Oct (low season on kangaroo route)

UK-MY-Aus-MY-UK: TOTAL $A 1,290.64

Aus-MY-UK-MY-Aus: TOTAL $A 1,175.86