Wouldn't it be nice if airlines charged all passengers the same price? Yes, it would, but there is a major flaw here. While most business travelers would gladly pay $440 to fly half way across the country, leisure travelers might balk at spending that much, especially when the family is flying.

Low-cost competition has brought fares down substantially, especially for price-sensitive leisure travelers, which on average comprise 50% or more of the passengers on any given flight. But those high load factors wouldn't exist if airlines didn't offer a large number of seats for $200 to $300.

So if our typical major airline stimulates leisure travel by selling the first 50 available seats for $200, then the other 70 travelers have to pay a base fare of almost $600 per ticket (including taxes and fees) in order to break even. Not fair, but it works.

But let's suppose that our airline treated everyone ecumenically with a $440 fare. The 80% load factor would plummet rapidly as leisure travelers defect to other carriers or postpone a visit to Aunt Martha altogether. That flight could end up with a 45% load factor or 68 passengers to shoulder the cost. In this case, each passenger would have to pay around $750 including taxes and fees for that airline to break even.

But this quickly becomes a vicious cycle as more passengers drop out with each price increase. At $750 per ticket, even business travelers may decide to substitute a conference call or consolidate business trips to defray those costs.

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