Hurricane Irma is devastating the
entire state of Florida and the carribean, and it is wreaking havoc on ticket
prices. Everyone from Miami to northern
Florida has been trying to get out of the danger that Hurricane Irma is
bringing and that is causing huge issues with airlines. There have been many stories about the prices
of different plane tickets increasing about $600 to $1000 and people having
been question about price gauging. But
what some people do not know about what goes into the pricing of tickets is
that there is an algorithm that adjusts the prices in real time. The algorithm uses the amount of tickets left
and looks at what other similar flights are priced at and of course they look
at the supply and demand of the flights.
Many of the flights leaving Florida are becoming over booking because of
the surging demand for tickets and the very small supply that are
available. The airlines began changing
the prices for their tickets once news came of the huge increase in ticket
prices. Now some airlines including Jet
Blue and Delta are selling the remaining tickets at $99 for direct flights and
capping at around $400.
It is very interesting to see how
significant a natural disaster can affect ticket prices and the overall
increase in the demand. For the airlines
they only can really do a couple things to make sure their customers do not get
furious with the outrageous ticket prices.
Things they can do to try and keep ticket prices lower is to increase
the supply of overall available flights or just keep the prices at a steady to
number that would make it more affordable for all the buyers.
It is sad that airlines had to increase ticket prices by such a drastic amount. I understand there are many factors that affect ticket prices, but I feel like there is a way for airlines to keep prices down especially with the current demand for flights going out of Florida. I am interested to see what is going to happen to ticket prices over the next few months as many places are going to fixing up what they have lost. I am wondering if the demand for tickets going into Florida will go up or down and how airlines (if they can) will help people.
ReplyDeleteCurrently the tickets are super inelastic and people are going to buy them no matter what. Around holidays are some of the only times that airlines have an increase in demand and raise their prices to maximize profit. Currently there is a huge demand for these tickets and a limited supply so prices can be extremely high as long as people will pay for them A firm is going to try and do everything it can to maximize their profits and right here is a perfect opportunity to do so. Ethically it may be wrong but from a pure economical standpoint it makes perfect sense.
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