The Goal of a Business is to Make Money

October 21st, 2008 | Tags: , , , ,

Response to the Consumerist post on As Airlines Become More Efficient, Cheap Seats Become Harder To Find.

Businesses tend to stay in business by making money. An airline which is selling off a bunch of cheap seats is likely not making money. Selling cheap, last minutes fares that make a profit over the marginal cost is good–but only if the larger fares have already covered the fixed costs of the flight.

Running a flight that won’t cover the fixed costs of doing business is no good for anyone except the customers that are happy they got a great deal (while driving the company into bankruptcy).

As an aside, the fewest people I ever had on a flight was 13 on a 737. Southwest wasn’t making money on the flight, but in the second half of September 2001, it was important to get people flying again. After unloading goody trunk on those flying (I still have two packs of Southwest Airlines playing cards) and chatting with the pilot who was sitting in the first row of the cabin, we took off. As we flew over NYC, the pilot made an announcement that if everyone moved to the left side of the plane (we could all get a window seat) we could see the search lights down below. All told, it was a very surreal experience.

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