OK, based on my own read of the code: a general collapse in first-class and business-class passengers should not have occurred as a result of this update. So the possibilities are:
- I have misread the code.
- Such a drop in fact didn't happen, and some airlines that have not yet posted have seen gains in ridership - gains which possibly haven't shown a profit for them yet, because they haven't adjusted prices upwards to capture the new demand.
- (2), except also this is happening within-airlines, and after a drawn-out rebalance of prices and quantities airlines will realize larger profits than before.
- Something I haven't thought of.
Sample Case: You and a competitor both run a route with the B/F prices at 1000/4000
Well lets just say a competitor opens up a class 1 lounge at one end of a route you both run. Here is what normal B/F passengers see.
Your prices stay at 1000/4000 .. your competitors prices are seen as 875/3600
If it was a class 3 lounge, now your competitors prices are seen as 625/2800
.. the effect is they've priced you out of the market .. passengers now see your prices as above the threshold to actually pick your route. (Or atleast my tests are showing that).
The effect of the lounge is too great.. I can it having a small "appeal" effect of maybe 5% ticket price .. but a class 3 lounge is approaching a 33% reduction in perceived prices. The competitors without lounges will have to lower their prices down near that perceived price and that makes it almost guaranteed that the big airlines will be the only ones that survive.
Yes, this does not produce a
general collapse in demand - in fact it produces an enormous increase in total demand. But in order to be realized people need to actually expand biz/FC capacity or raise prices.
If some airlines saw a
sudden collapse of their biz/FC ridership, that tells us that one of the following happened:
- Competition that opened a lounge had previously been running routes with lots of unused biz/FC capacity and hadn't noticed.
- Competition that opened a lounge also expanded their biz/FC capacity at the same time (probably at the cost of econ seats) and is enjoying the extra profits.
- There is a bug in the code somewhere.
I don't think (1) is a problem, frankly, and I don't think (2) is a problem either - it means that if you don't have a lounge, you need to focus on competing for economy class passengers.
There is another possible outcome, where your ridership
doesn't collapse, but instead the competitor is now earning much larger profit margins on his biz/FC tickets because he raised prices.
I am still worried that (3) is the answer, though.
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