Boston to New York for $7? Can someone explain why?

Posted on October 31, 2008, 9:14 pm, by Shashank Nigam Comments Comments

Although American Airlines posted a $45 million profit in the last quarter, it was only the sale of a financial advisory unit that kept them in black. Otherwise, they’d have lost over $300 million in one quarter. But why? Shouldn’t all those charges for anything that’s not attached to the plane helping boost profits? Apparently not. Since the fares themselves are not just low, but utterly unrealistic and unsustainable.

Shocking prices!

Here’s an shocking discovery I made while searching for fares on Vayama.com. The fare for a JFK-Singapore flight is $800.20 (on Cathay Pacific), and from Boston – JFK – Singapore is $807.20 (on AA + Cathay Pacific). That means the flight from Boston to JFK is merely $7! That is less than the price for a person to get from Manhattan to JFK by subway! Even a regular bus ticket from Boston to New York City is $15. See the screenshots below for yourself.

How is this possible?

Even though both American Airlines and Cathay Pacific are part of the OneWorld alliance, and cooperate on this flight and have revenue share agreements, how is it possible for the fare to be so low? Is American Airlines really charging only $7 for this ticket? Or is Cathay Pacific or Vayama footing the difference between the regular Boston – JFK fare? If not, then such fares are totally unsustainable and probably the cause of many airlines’ downfall. It is here that the belt needs to be tightened, not by charging $2 for a cup of water!

I personally don’t have an explanation for such fares, but if you do, please share your thoughts in the comments section. I (and my readers) would love to be enlightened.

P.S: I generally don’t digress from writing about branding for airlines, but just couldn’t help deviate here towards the pricing side after my discovery online.

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  • Peter
    This is possible due to code-sharing agreements between American Airlines and Cathay Pacific. American will offer discounted fares to those who are connecting on Cathay Pacific Flight and vice versa (AA also do the same for BA and other code sharing partners). Of course, the actual fares received by AA is not 7 dollars, but it is usually substantially lower than the normal retail price of the ticket (usually at the discounted inter-airline rate) and CX will not received their normally price for their JFK to HK flight either, but there is certain advantages even though the yield might seems to be lower.

    By having AA and CX offer such discounted tickets from Boston to HK via JFK, it helps fill up AA Boston to JFK flight and also helps fill up Cathay JFK to HK flight, especially during quiet period of the year. Without this kind of code-sharing discount, neither CX nor AA can maintain the frequency of service and their profitability of their routes. In extreme cases during low seasons, this kind of code-share agreements helps airline maintain certain load factor and ensure that they at least break-even on a lower yield then losing money due to lack of demands. If you look carefully at your booking, you will notice that your requested flight is over New Years Eves and most airlines will have a reduced load factor due to the holidays. Hence, they will offer this kind of fares just to fill up the seats. If you look again for other times (I just did a search, during chinese new year period [departure 23rd Jan, return 5th Feb]), you will notice that the price for the same sector will have a USD200 price difference. Hope this will give you a satisfactory answer.
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