Average Fares Disbursed for JFK–LAX Route, 2009 (April to July)

Average Fares Disbursed for JFK–LAX Route, 2009 (April to July)

Source: Adapted from Vasigh, B., K. Fleming and T. Tacker (2013) Introduction to Air Transport Economics, Second Edition, Burlington, VT: Ashgate. Note: for one-way flights.

Unlike transportation modes such as public transit, airfares for a single flight are not based on the same fare system as airlines practice yield management. Thus, passengers on the same flight may have paid a different airfare even if they are sitting in the same section of the aircraft (e.g. economy). Depending on the airfare, the demand can show different elasticity levels, with high airfares having a low elasticity (fare variations having almost no impacts on the demand) and low airfares having a high elasticity (fare variations have a high effect on the demand).

The above figure illustrates the situation using the number of passengers who paid a specific airfare between LAX (Los Angeles) and JFK (New York) over three months. While 92% of the passengers paid an airfare of less than $1,000, 7% paid between $1,000 and $2,000, only 1% paid above $2,000. Usually, seats are put on the market at a low fare, and as the plane is filled, the fare increases. The last few seats are sold at a high fare as they concern passengers with low elasticity and willing to pay a high fare for the convenience of being on a specific flight. Elasticity is, therefore, relative to the trip purpose, which can range from discretionary such as tourism and personal purposes (high elasticity) to business activities (low elasticity).