Will passengers bear airline fuel risk for lower upfront fares ?

An article in Bloombergbusinessweek (October 8,2012) describes an effort by Allegiant airlines, with ticket prices at $89, to share airplane fuel risk with passengers. The proposal – passengers pay a lower fare upfront and a fuel charge based on actual airplane fuel prices, or pay a higher upfront fare to lock in seat prices. The impact will be to share risk with passengers ready to accept it, thus benefiting both entities. Will such solutions be accepted by passengers as similar to baggage fees ? How can passengers be convinced of the appropriateness of the fuel charges levied later? What other service industries can use such risk sharing schemes ?

About aviyer2010

Professor
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One Response to Will passengers bear airline fuel risk for lower upfront fares ?

  1. Buying an early seat will likely lead to a higher variation in balk rate. When the gas price is too high, more customers will balk. When the gas price is too low, more customers will arrive causing over-booking. The higher mismatch of supply-demand will probably be more expensive than shifting the risk of gas prices.
    I’ll think about payment to reserve then payment based on market price for other industries…

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