Do people really sell airline seats on a forward basis?
Well – people don’t, but the airlines do. You need to view the airlines position – and ask yourself why they would sell seats months in advance. The answer is that they want to be able to estimate forward demand – as well as lock in a certain percentage of their revenues. They are often willing to offer low forward prices – in order to ensure their planes will be full. It’s a simple trade off on their part. Ship owners occasionally view their market the same way.
