Economist Befuddled By Airline Industry

Lynne Kiesling

I really like this column by economist Charlie Wheelan about the airline industry:

There are a lot of industries and businesses that I don’t thoroughly understand. But they’re different from the airlines in two key respects: 1) They don’t routinely make my life miserable; and 2) They seem to make a lot of money. …

1. Why is there no “in between” fare option — something more comfortable than a cattle car but more affordable than business or first class? …

2. Why haven’t the airlines been more effective in dealing with the biggest cost of air travel: time lost to security and congestion delays? …

3. Does it really make sense in the long run to charge us something for nothing? …

4. Is it too much to expect just a little more empathy?

You’ll have to read the article to see his elaborations on these questions. Among other things, he points out that auctioning and better pricing of gates and takeoff and landing slots would, granted, lead to higher fares, but it would also be the best thing the industry could do to improve the appalling congestion that they can’t seem to keep from creating.

I think he totally hit the nail on the head. I used to love, love, love to fly, and have been Platinum on American for a while. But last year and this year I’ve really dialed it back, because it’s just such an unpleasant experience. I’ve jettisoned almost all discretionary flight travel.

That said, I do think that part of the problem is that “the flying public” has prioritized low fares over other aspects of airline travel, so either we have really been pushed to the lowest common denominator, or I am not in the modal part of “the flying public” distribution. Either way, flying sucks.

BTW, I’m glad to discover this column; I really used to enjoy his commentary when he was the local economics commentator at WBEZ, the NPR station in Chicago.


8 thoughts on “Economist Befuddled By Airline Industry

  1. Is he still at the Harris school? I really liked his Naked Economics: one of the best pop-econ books. I wonder if he’ll be coming out with another book.

  2. Is he still at the Harris school? I really liked his Naked Economics: one of the best pop-econ books. I wonder if he’ll be coming out with another book.

  3. “Why is there no “in between” fare option — something more comfortable than a cattle car but more affordable than business or first class?”

    United does this, at least as regards extra leg room, with what they call “Economy Plus.” Several international airlines have a “Premium Economy” that is in between business class and coach, but is actually in a different cabin with different levels of service.

    US domestic first class is in some ways an “in between” option, as it’s not as nice as international business class.

  4. “Why is there no “in between” fare option — something more comfortable than a cattle car but more affordable than business or first class?”

    United does this, at least as regards extra leg room, with what they call “Economy Plus.” Several international airlines have a “Premium Economy” that is in between business class and coach, but is actually in a different cabin with different levels of service.

    US domestic first class is in some ways an “in between” option, as it’s not as nice as international business class.

  5. Yes, I believe he is still at Harris.

    United’s Economy Plus is a version of this, and I like that you can pay an extra charge to get seated there; it used to be restricted only to frequent flyers.

  6. How much is it that the flying public has prioritized low fares, and how much is it that fare search systems and/or travel agents tend to be designed to only list prices without corresponding information about quality?

    Here’s what I see at work. First, simply because of history, travel agencies and reservations systems are built to just list out the lowest prices between two points. Now, internet agencies and more sophisticated fare search engines are able to list out many more fares, but if you call up a travel agent, or you don’t know better, you are just going to look at the fare (and maybe dates/times).

    But here’s the thing: the systems don’t provide any other data about the quality of the product, only the price (and the date/time). If you’re a frequent flyer, sure, you learn and you get to know the tricks, and you look at seat maps to see how full a flight is, and you know what is a good seat on what aircraft, etc. (There’s no fare search engine that easily lets me filter and sort on all this information.) But most people don’t have any of this information. And most of the ones who do have the information are price-insensitive business travelers, who mostly just need to stick with a single mileage program.

    As for the vacation travelers, well, I suppose some airlines are now starting to try to differentiate their brands. But the problem here is that they can only educate consumers up to a point, so you wind up just building up a brand for each airline, rather than being able to teach consumers to discriminate among the quality of individual seats at various fares.

  7. How much is it that the flying public has prioritized low fares, and how much is it that fare search systems and/or travel agents tend to be designed to only list prices without corresponding information about quality?

    Here’s what I see at work. First, simply because of history, travel agencies and reservations systems are built to just list out the lowest prices between two points. Now, internet agencies and more sophisticated fare search engines are able to list out many more fares, but if you call up a travel agent, or you don’t know better, you are just going to look at the fare (and maybe dates/times).

    But here’s the thing: the systems don’t provide any other data about the quality of the product, only the price (and the date/time). If you’re a frequent flyer, sure, you learn and you get to know the tricks, and you look at seat maps to see how full a flight is, and you know what is a good seat on what aircraft, etc. (There’s no fare search engine that easily lets me filter and sort on all this information.) But most people don’t have any of this information. And most of the ones who do have the information are price-insensitive business travelers, who mostly just need to stick with a single mileage program.

    As for the vacation travelers, well, I suppose some airlines are now starting to try to differentiate their brands. But the problem here is that they can only educate consumers up to a point, so you wind up just building up a brand for each airline, rather than being able to teach consumers to discriminate among the quality of individual seats at various fares.

  8. There is a professor whose name is Aaron Gellman in Kellogg, and he is a really expert in aviation and airlines~

    I personally don’t think the price discrimination is a bad idea, because our poor student could have better deals 🙂

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