I'm curious - is Delta's decision to start such a program premeditated in a similar way? Personally, were I to run a business, I'd be very ill-equipped to handle anything approaching such a level of economic theory.
Legacy airlines have revenue management departments that use sophisticated mathematical models to price discriminate between passengers to obtain the maximum yield from each day's operations.
Airlines without such advanced techniques to rip off less price sensitive customers have a hard time competing. F9 and WN* and the like have much less complicated models and more predictable pricing. To compete, they have to go after loyal bargain hunters like vacationers and small business commuters. They have no effective scheme to squeeze big businessmen with expense accounts. By building a reputation for transparency, they can charge stable prices and make money. It takes time and commitment, though.
DL, on the other hand, makes money by offering to bump regular coach passengers even off very oversold flights in favor of expense-account men on full-fare coach tickets. DL no longer advertises the guaranteed seat benefit for very profitable Platinum Medallion customers on the Delta web site, but you can call the medallion line and get a ticket on any Delta flight any time. It will cost you, but you will get it. Delta will just have to pay to bump someone else at the gate.
Two revenue models. Both survive in the market. Neither happens by accident.
I'm curious - is Delta's decision to start such a program premeditated in a similar way? Personally, were I to run a business, I'd be very ill-equipped to handle anything approaching such a level of economic theory.