Thursday, 21 August 2014

Load Factors Are Important Calculations During Lean Seasons

Why are the air tickets so lowly priced during the lean season? Well, the answer is obvious-due to the lesser demand during this season. This is the usual practice for all the airlines around the globe. They will offer you unimaginably low prices during the lean season travel and will push these up during the high-demand season. Travelers, whose itineraries are not bound by seasons, make use of this fact and travel during these periods in order to make most of the savings.

Load factors, or the percentage of seats filled by the carriers, are important indicators of this demand. During the lean season, one can expect to see the reduced load factors for airlines. In order to generate greater occupancy of their planes, the airline companies resort to heavy discounting- even to the extent of being irrational. What is the reason for this heavy discounting?

Price of air tickets is composed of two factors: fixed and variable costs. The fixed part is something which the airline has to pay due to its committed scheduled flights, irrespective of whether it is flying full or not. This is generally composed of the government taxes and fuel charges. The variable components are, on the other hand, dependent on a number of factors such as passengers being carried, distance flown, etc. By resorting to heavy discounting the airlines try to recover at least the fixed costs of the price of tickets.

If, during the lean season, you find that the airline is reporting better load time than its competitors, then the first thing to analyze is whether the carrier has resorted to heavy discounting or not? There are good chances that passengers have turned to it for the price factor. In fact, this practice initiates price-war among carriers, all for the benefit of passengers. Only those carriers that have a strong customer loyalty might be able to maintain respectable load factors, though even those might see somewhat decline due to lower prices being offered by competitors.  

No comments:

Post a comment