I thought this was an interesting question, posted by my friend Andrew Norton over on catallaxy, and thought I’d bring it to the attention of the economists hereabouts (Tyler? Alex? Brad?)
Perhaps the economists or marketing experts among Catallaxy readers can suggest reasons why both Qantas and VirginBlue have announced $6 fuel surcharges, due to rising oil prices.
The question isn’t why they are lifting their prices – that’s clear enough – but why they are levying a separate fuel surcharge. After all, this is not an industry with fixed prices. If I wanted to fly from Melbourne to Sydney in two weeks time, for example, Qantas can offer me 4 different fares ranging from $166 to $335, i.e. I can halve my costs if I am prepared to fly at a time when there is little demand for seats. Over at Virgin Blue, I have a choice of 6 different fares ranging from $79 to $229, so I can save nearly two-thirds if I fly at a low-demand time and take a ticket with restrictions on changing flights. Both airlines could have simply increased their prices by $6, and most customers would be none the wiser. We’d just think it was part of the airlines’ normal efforts to make sure as many seats on each flight as possible are sold.
By announcing the $6 surcharge they seem to be unnecessarily informing highly price sensitive customers that air travel is now more expensive, and by putting it in the form of a temporary-sounding levy encouraging them to wait until prices drop again.
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