Monday, May 18, 2009

théorie des prix

I am not sure how France has become a theme the last few days. Nonetheless, a few months ago the PG had an article about how Delta dropped the price of its new non-stop flights to Paris. That article fromMarch explained the fares were down from their initial special offer of $1,200 to a low $700.

Things must not have picked up much. I can attest you can buy right now round trip non-stop tickets from Pittsburgh to Paris in the middle of peak summer season for all of $530 RT, around $610 including all taxes and fees.

That price is amazing to me regardless of what it says about demand for the flight. What little I know of the black box of airline fare setting isn't worth getting into here. Clearly the overall industry is hurting. But just out of curiosity I tried to see what fares Delta would give me for other itineraries that you would think would be cheaper. NYC to Heathrow for example. Looking at identical dates to what I bought for a Pittsburgh - Paris trip, I couldn't get anything lower than $630 (before taxes and fees) which would be pretty amazingly low in itself for the middle of the summer.

To be fair, it's a new service and all. But you can't claim it lacks in visibility between the earned media in the press and the paid advertising I see around. That and what I hear are some deliberative corporate policies locally I hear of trying to encourage folks to buy Delta tickets on the flight for European travel.

What gets me curious is the news about how we, the royal we, have made a deal with Delta guaranteeing a certain amount of passenger demand for the new flight. I am curious how that deal is written since it seems to me that there could be a principal-agent problem in there somewhere. Delta ought not to have much incentive to lower fares so low if they have a third party paying them if they don't fill the seats. But I have no idea whatsoever the particulars of that deal... I just can't get out of my head the idea that somebody Downtown is paying for part of my ticket indirectly.

With that I will surrender to the brief spasm of political numerology that is about to take place.


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