Price threshold drop with more pax?

[OnyxWingman]

My airline, Aer Lingus, is a full economy airline from Dublin. Anyways, I was playing around with my ticket price. As I lowered it, more profit was being made from more people. Once I hit about $365 for a price, the PAX was not at its max value, I lowered it to like $360 and it tanked from $37,709 to about $11,000.

Is there a way to calculate the ideal ticket price? I always thought it was when you got the full PAX, but it seems not.

Edited January 24 by OnyxWingman

[sviridovt]

Your revenue is number of pax * price of the ticket (plus whatever IFE you have this might bring some income). The costs of your flights do not depend on the price so may be discounted for this discussion. The default price is slightly lower than the median of what the willingness to pay is, such that with that price you should be able to capture about 80-90% of the demand, if you want to capture 100% you'll have to lower prices, similarly if you capture less of a demand, you may increase prices to generate more revenue per passenger. 

Further consideration is which passengers you're capturing, for example if your aircraft has 2 or more classes, it's possible to see that pricing your economy class might drive passengers away from business class as you have excess capacity in economy from lower cost pax opting to not fly (admittely there is no mechanic in the sim to say that if the prices are similar enough some passengers will opt to 'spoil themselves' and upgrade, this is covered in my plans for demand redesign). In this scenario, you might have passengers who are willing to pay a premium price but would still opt for the cheapest option, as you price people out of economy those folks will buy an economy ticket rather than a business class which may also decrease your revenue. Essentially it's important to remember that the passengers are 'fluid', and do not attach themselves to a particular class just as in real life your business class competes with your premium economy class and economy class etc. 

As for an ideal formula, there isn't a mathematical formula that I'm aware of, and while I'm sure that it exists, I try hard to make sure that there isn't a hard and fast way to 'win' the system. I aim for realism with the sim so want to keep some variability to keep things interesting. 

[OnyxWingman]

16 hours ago, sviridovt said:

Your revenue is number of pax * price of the ticket (plus whatever IFE you have this might bring some income). The costs of your flights do not depend on the price so may be discounted for this discussion. The default price is slightly lower than the median of what the willingness to pay is, such that with that price you should be able to capture about 80-90% of the demand, if you want to capture 100% you'll have to lower prices, similarly if you capture less of a demand, you may increase prices to generate more revenue per passenger. 

Further consideration is which passengers you're capturing, for example if your aircraft has 2 or more classes, it's possible to see that pricing your economy class might drive passengers away from business class as you have excess capacity in economy from lower cost pax opting to not fly (admittely there is no mechanic in the sim to say that if the prices are similar enough some passengers will opt to 'spoil themselves' and upgrade, this is covered in my plans for demand redesign). In this scenario, you might have passengers who are willing to pay a premium price but would still opt for the cheapest option, as you price people out of economy those folks will buy an economy ticket rather than a business class which may also decrease your revenue. Essentially it's important to remember that the passengers are 'fluid', and do not attach themselves to a particular class just as in real life your business class competes with your premium economy class and economy class etc. 

As for an ideal formula, there isn't a mathematical formula that I'm aware of, and while I'm sure that it exists, I try hard to make sure that there isn't a hard and fast way to 'win' the system. I aim for realism with the sim so want to keep some variability to keep things interesting. 

Thank you. I found out that I was also using too much flights, reducing amount of flights increases demand, therefore more PAX for the same ticket price.