

Continental Selling Options on Tickets - JumpCrisscross
http://www.nytimes.com/2012/02/28/business/new-airline-revenue-goes-beyond-baggage-fees.html?_r=1&ref=business&nl=business&emc=dlbka22

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untog
_“It’s a value to people like a stock option is a value,”_

Of course it isn't. It doesn't generate dividends and I can't sell it. Idiocy.

My real fear: Continental starts paying Kayak and co. for data on who is
searching for what, and when. Price 'insurance' becomes necessary because
Continental jacks up prices as soon as they see a spike in demand.

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beagle3
> My real fear: Continental starts paying Kayak and co. for data on who is
> searching for what, and when. Price 'insurance' becomes necessary because
> Continental jacks up prices as soon as they see a spike in demand.

Continental is already serving essentially every kayak search. They know how
many people are searching for what, even if they don't know exactly who. If
they want to raise prices as a result of search spike, they can already do
that.

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andylei
who would buy an option on an underlying sold by the same people that control
the price of the underlying? if continental sets the price of the seats and
then sells you calls or puts on those prices; why would anyone buy those
options?

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gaius
The way airline seat pricing works is say you have 200 seats on a plane, you
might pick 4 prices and sell the first 50 for the lowest, the next 50 for the
3rd lowest and so on. This is why seats seem to get more expensive closer to
the date of the flight, tho' it is not really based on time but demand. To
make this valuable, the price difference of the next band up must be more than
the option - but I agree that this is a gamble unless you know the inventory
well.

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bonzoesc
You could know the inventory pretty well with FareCast[1] and ExpertFlyer[2].
Paying a few bucks to lock in a lower fare before prices skyrocket at the last
minute seems quite reasonable.

1: <http://www.bing.com/travel/> 2: <http://expertflyer.com/>

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gerggerg
It's not an option, it's fare price insurance. Essentially airlines have taken
the 'insure everything' game that retailers found out was massively profitable
years ago. Also they've taken to selling cheap trinkets, charging fees for
everything, and recently playing commercials on the plane's loudspeaker
forcing every one in the cabin to listen. (Which if they really cared about
airline safety/security they wouldn't play as the commercials train me to
ignore everything that comes over the loudspeaker)

None of this is good for consumers, the only way the airlines make money off
insuring things is if we loose more of it in the long run, and none of these
expenses are large enough to justify the payment. Just like the service plans
at best buy.

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tomjen3
Man if I ever hear commercials on the loudspeakers I would find a way to get
that airline banned from flying.

It should simply not be legal.

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jarrett
Airlines getting into banking? I understand that they've been facing cash-flow
problems for years. But this seems like way too much diversification. Why
would an airline expect to do well in the banking market, when banks are
already struggling? Shifting focus from your core competency (running
airplanes) to a struggling industry where you lack expertise or a competitive
advantage (banking) makes little sense to me.

I've never understood all the gloom and doom surrounding the airline industry,
anyway. There is still ample demand for air travel. Especially considering the
lack of viable alternatives in the US, I can't imagine we'll reach a point any
time soon when air travel isn't commercially viable.

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nitid_name
The largest factor for Airline profitability, at least historically, is the
cost of fuel. Airlines that sign a 1/2/5/10 year futures agreement at exactly
the right moment can save an extraordinary amount of money compared to their
competition.

Jet Blue, for example, has been doing quite well in the last few years. The
biggest reason for this isn't their (quite wonderful) service or (relatively
new) air fleet; it's because their fuel contracts were signed at a damn near
perfect moment.

Airlines run razor thin margins. A few percent savings in fuel can easily
double their margin, which can be then spent on marketing, fleet improvements,
sniping experienced pilots by offering higher wages, or any other form of
capital investment.

