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The economics behind "Basic Economy" – A masterclass in price discrimination

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Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#131

Post by tonyedgecombe »

dkjaudyeqooe wrote: post #128
burlesona wrote: post #84

Earlier quoted context omitted.

Airfare in the US costs less today than it did in the 90s, adjusted for inflation: https://www.bts.gov/newsroom/2024-annual-average-domestic-ai...

Average airfare isn't a useful stat in this respect. What would be useful is comparing fares for individual routes over the years, which would tell a different story. Average fares are skewed by low cost carriers entering the market.

>Airlines are an abusive oligopoly there

>Average fares are skewed by low cost carriers entering the market.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#132

Post by robocat »

pete762 wrote: post #119
meta_ai_x wrote: post #102

Earlier quoted context omitted.

Having to pay for your bags and meals are actually good for consumers and overall environment. If passengers are forced to pack lightly because they have to pay extra fees is actually a win-win-win for everyone. Plus it is less discriminatory because my airfare is not subsidizing someone else abuse of the system. Same goes with food. I want the option to not pay for the shitty airline food.

The daily and seemingly random price fluctuations of tickets are much larger than the cost of meals you'd save, basically noise.

The "noise" is very likely intentional.

A common way to price discriminate is to make the cheaper options take time and effort to obtain. People with less money will put in more time and effort e.g. price comparison, looking for discounts (codes or whatever), taking a few days to check prices, willing to move travel dates/times to get a cheaper price. Those with more money pay more and value their time/effort more highly.

Flight prices are not random - they are highly optimised (even using genetic A/B price generation algorithms that the airlines themselves might not fully be able to predict).

PS: Avoid LATAM Airlines Chile - dark pattern on website - those bastards increased the price while I was entering the credit card to pay (a popup - was ~2% but a dirty trick - maybe discrimination after detecting card owner credit details?).

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#133

Post by carlosjobim »

Frieren wrote: post #126
carlosjobim wrote: post #97

Earlier quoted context omitted.

That rich guy in your example probably values price discrimination just as much as you do, because he - presumably not being a cheapskate - can just pay more and know that all the conveniences he wants will be there for him. And then he goes back to thinking about his next genius business plan, because it's not worth his time looking for the best bargain. So both win.

> he goes back to thinking about his next genius business plan The reverence that people has for rich people astonishes me. Rich people is just average people with money. Actually, they are probably worse at their jobs because they need less effort to earn money. Rich people are not rich because they are "genius" but because they game the system.

Sometimes a comment is tongue in cheek. He might be thinking about a genius business plan, or he might be thinking about redecorating his mistress house. But he probably isn't going to spend hours looking for the cheapest rate for a flight.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#134

Post by dkjaudyeqooe »

tonyedgecombe wrote: post #131
dkjaudyeqooe wrote: post #128

Earlier quoted context omitted.

Average airfare isn't a useful stat in this respect. What would be useful is comparing fares for individual routes over the years, which would tell a different story. Average fares are skewed by low cost carriers entering the market.

>Airlines are an abusive oligopoly there >Average fares are skewed by low cost carriers entering the market.

The large carriers, created through mergers that should never have been allowed, have the most popular routes locked up through ownership of landing/takeoff slots and similar. On those routes, fares have substantially increased due to a lack of competition.

The low cost carriers business model is to fly new routes (to secondary airports if required) at low prices, often creating new demand (Breeze is a classic example of this).

The math is very straight forward if you consider what each group is doing in the market.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#135

Post by sandworm101 »

valleyer wrote: post #118
sandworm101 wrote: post #107

>> Third-Degree Price Discrimination: The seller charges different prices to different groups of consumers based on identifiable traits or segments, often tied to different demand elasticities. Common examples in airlines include offering discounts to seniors, students, or military, or more broadly, the use of market segmentation by travel purpose. Military discounts are not a marketing trick. Some companies actually…

Teachers, nurses, and janitors also "serve". I agree: it's not price discrimination. It's jingoism.

The difference is that teachers/cops/firefighters arent subject to "unlimited liability". They cannot be ordered to do things that will cause thier deaths. Cops can say no, or quit and do something else. Soldiers cannot.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#136

Post by steveBK123 »

AnthonyMouse wrote: post #115
steveBK123 wrote: post #109

Earlier quoted context omitted.

Seems like the opposite as the origin was Delta trying to compete with Spirit and then all the legacy carriers following.

Those are two different things. One is, you want a phone with drivers in the kernel tree so you can keep putting the latest version of vanilla Android on it without relying on the OEM. Except the market is too concentrated and then nobody makes that. Competition fixes this. The other is, if you give people the choice between a $200 plane ticket with two checked bags and lots of leg room and a $170 plane ticket where…

Everyone loves to complain about flying but generally all search by lowest price sort, click the first one. Flying is quite cheap in inflation adjusted dollars and customers could be a bit more selective, but are not.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#137

Post by os2warpman »

dkjaudyeqooe wrote: post #78
wagwang wrote: post #39

Aren't flights at an inflation adjusted all time low and most airlines operating at a razor margin? Seems like the market doing their job. Also price discrimination sounds a lot worse than what it really is? Idk, I don't like that air travel is so easily accessible but, the pricing stuff is the least of our worries.

> Aren't flights at an inflation adjusted all time low Yes, due to improved technology and equipment and because prices have been historically very high. > most airlines operating at a razor margin No, many airlines operate in imperfect markets and reap excessive profits compared to other airlines.

>No, many airlines operate in imperfect markets and reap excessive profits compared to other airlines.

Which ones? Practically all airlines are public companies with easily accessible financial data.

All of the one's I've looked at are barely scraping by with single digit profit margins. Delta is around 6% and Emirates is among the if not the best at around 9%.

Which airlines are "reaping excessive profits"?

I would like to invest in them.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#138

Post by nec4b »

Frieren wrote: post #126
carlosjobim wrote: post #97

Earlier quoted context omitted.

That rich guy in your example probably values price discrimination just as much as you do, because he - presumably not being a cheapskate - can just pay more and know that all the conveniences he wants will be there for him. And then he goes back to thinking about his next genius business plan, because it's not worth his time looking for the best bargain. So both win.

> he goes back to thinking about his next genius business plan The reverence that people has for rich people astonishes me. Rich people is just average people with money. Actually, they are probably worse at their jobs because they need less effort to earn money. Rich people are not rich because they are "genius" but because they game the system.

>> Rich people is just average people with money.

I suppose you can play basketball as good as Luka Doncic or write and perform songs as good as Taylor Swift?

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#139

Post by foxyv »

wagwang wrote: post #39

Aren't flights at an inflation adjusted all time low and most airlines operating at a razor margin? Seems like the market doing their job. Also price discrimination sounds a lot worse than what it really is? Idk, I don't like that air travel is so easily accessible but, the pricing stuff is the least of our worries.

The fact that we don't have a high speed rail network in the United States is a travesty. Air travel is the least economical form of public transit. We pack human beings into these planes like meat in a can just to make them affordable and then the airlines go bankrupt anyways.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#140

Post by FuriouslyAdrift »

distances wrote: post #130
carlosjobim wrote: post #90

Earlier quoted context omitted.

Ryanair has been very successful with their PR. They've made sure that people who don't fit their customer profile will have an irrational hate for the airline without ever having flew them. And that people who are looking for the biggest bargains flock to them. And the price difference is just ridiculous.

And I don't even understand what everyone's problem with Ryanair is, except maybe the company's treatment of its own personnel. Flights have been just as smooth as with some more expensive carriers. I haven't gone to any party destinations though, if that's what the bacchanal reference is about.

I also have greatly enjoyed their flights for the most part. The reference was in relation to the drunken fights that seem to be a "common" occurance.

Spirit Air in the US has somewhat of a similar rep.

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