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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

#151

Post by nickff »

dkjaudyeqooe wrote: post #129
nickff wrote: post #82

Earlier quoted context omitted.

The airline industry is famously unprofitable; it is commonly said that on net, the sum total of airlines have made $0 over the course of their history. It is true that there are periods where they do make a profit, but these periods are offset by times when they make massive losses (such as during COVID, after the Great Recession, and after 9/11).

Globally, big airlines seem to be doing fine: https://www.aerotime.aero/articles/most-profitable-airlines I think there are lots of airlines that are propped up by governments that lose money leading to the meme you're quoting. Many industries were affected by the events you quoted, those sorts of things aren't specific to airlines.

There are two issues with doing a static analysis on something like this:

1) Survivorship Bias: you are only looking at airlines that currently exist, and ignoring ones that have gone out of business.

2) Recency Bias: you're examining them at a time of relative prosperity and stability, ignoring their pasts.

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

#152

Post by hnburnsy »

thehappypm wrote: post #149
hnburnsy wrote: post #86

A masterclass that has had no discernable affect on revenue, in fact revenue for the airlines is down over the past 10 years, but I guess it has kept those revenue analysts employed. >Inflation-adjusted PRASM (Passenger Revenue per Available Seat Mile) for major U.S. domestic carriers from 2015 to 2024, all expressed in 2024 dollars for consistency: Year Delta (¢) American (¢) United (¢) Southwest (¢) Alaska (¢) JetB…

is prasm the best metric though? It doesn’t take into account costs, for example, airlines have gotten more efficient over the years with planes like the 737 max so you can make more profit off of less revenue. Likewise, non-passenger revenues, like taking delivery cargo in the cargo bay, can be masked

Agreed but the article was about price discrimination which would affect revenue. If it is not increasing revenue than what is it doing?

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

#153

Post by Frieren »

nec4b wrote: post #138
Frieren wrote: post #126

Earlier quoted context omitted.

> 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?

Are that the average rich person?

I know very hard working people that created their companies and got rich, they treated their employees fairly and were smart and capable.

They are not your average rich person. Your average rich person is an average person with average intelligence, average knowledge but protected from reality what makes them more gullible and they have a hard time understanding many not so difficult concepts about the economy.

Exceptions exist. Your anecdotal evidence is confirmation bias for your world view, quite far from reality.

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

#154

Post by jjk166 »

bluGill wrote: post #40
djoldman wrote: post #10

It appears that taking advantage of human imperfections and irrationality are taking up more and more of companies' strategies and time. You've got folks thinking constantly about advertising, pricing strategies, dark patterns, network effects that prevent or discourage churn, etc., in ways that tend to exploit flaws in the consumer's decisioning process or gaps in their knowledge, to the consumer's disadvantage. It…

You can find people back in 1880 (probably before, but that is as old as I've seen something) saying much the same thing. Yet we have had a lot of innovation since then.

People were saying that in the 1880s, which was the gilded age. People took action at the time to deal with the problem, and it was significantly reduced for many decades.

Just because an issue existed long ago does not mean it has continuously existed or is intractable.

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

#155

Post by jjk166 »

thehappypm wrote: post #146
atom_arranger wrote: post #145

Earlier quoted context omitted.

I would have thought this as well. Looking at a trip from Fukuoka to Tokyo though. Shinkansen takes 5 hours and costs about $200. An economy flight is around $50 and takes less than 2 hours, although it’s possible there’s a lot more overhead to that time.

I don’t know if there’s really that much time overhead. If I’m spending $200 on that rail ticket, I’m gonna arrive at the train station early to account for any issues I have getting there, just like an airport. I find it a little frustrating that people argue that there is zero time overhead in getting to a train station but there’s like three hours with an airplane when in fact, it’s often two hours for airlines an…

For flights you have to go through significant amounts of security which is often highly variable.

Further, flights tend to be distinct events. For many routes there may only be one per day, and even for busier routes you usually can't just hop on the next one without significant effects on your travel plans, for example rescheduling connecting flights. Trains on the other hand just keep running, there's going to be another one going the exact same route every few hours at most, likely less for busy routes. You can go to a train station without looking at the schedule, for a flight you're scheduling your entire day around it.

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

#156

Post by foxyv »

atom_arranger wrote: post #145
foxyv wrote: post #139

Earlier quoted context omitted.

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.

I would have thought this as well. Looking at a trip from Fukuoka to Tokyo though. Shinkansen takes 5 hours and costs about $200. An economy flight is around $50 and takes less than 2 hours, although it’s possible there’s a lot more overhead to that time.

While economical in the sense of a personal budget, airplanes are not nearly as economical as high speed rail in general.

Subsidies and externalities kind of muddy the water when it comes to ticket prices. While it is generally cheaper to fly, this is because you are not paying for the damage your flight is causing to the city around it. Noise, pollution, damage to property, and disruption of the quiet enjoyment of those around you.

Shinkansen is a for profit business that acts as an engine to turn worthless rural land into extremely valuable land. Air travel does the opposite. Property values around airports are extremely low. Every plane rattling people's windows and dropping a plume of unburnt fuel and exhaust on people's heads damages the area under it.

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

#157

Post by hooverd »

bobthepanda wrote: post #150
Zak wrote: post #30

Earlier quoted context omitted.

I don't quite follow what would motivate activist investors to pressure a company to stop doing the things that made it profitable.

There were also long term failures, but the investors are throwing out the baby with the bathwater. After their flight scheduling meltdown due to outdated software it took them two weeks to restore back to a normal schedule. https://en.wikipedia.org/wiki/2022_Southwest_Airlines_schedu... They've also made some longer term strategic flops, like investment into Hawaii, which by its isolated long-haul nature is signific…

The Maui onion pretzels were worth it.

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

#158

Post by atom_arranger »

foxyv wrote: post #156
atom_arranger wrote: post #145

Earlier quoted context omitted.

I would have thought this as well. Looking at a trip from Fukuoka to Tokyo though. Shinkansen takes 5 hours and costs about $200. An economy flight is around $50 and takes less than 2 hours, although it’s possible there’s a lot more overhead to that time.

While economical in the sense of a personal budget, airplanes are not nearly as economical as high speed rail in general. Subsidies and externalities kind of muddy the water when it comes to ticket prices. While it is generally cheaper to fly, this is because you are not paying for the damage your flight is causing to the city around it. Noise, pollution, damage to property, and disruption of the quiet enjoyment of t…

That’s an interesting point, I do often hear about being near a rail line as being a benefit for property values, but you don’t usually hear the same thing about being near an airport. Although this might partially be because a rail line is something people would use more often than an airport.

I don’t have much of a personal opinion on this. I just thought it was interesting. You’d think this train with a fixed route, tons of seating, traveling multiple times per day, would be cheaper than a plane, but somehow it isn’t.

The pollution and noise pollution is an interesting point, that could probably be improved somewhat for air travel while keeping the benefits, if electric planes could be developed. I was in India at one point and the noise of just being anywhere near roads was terrible day and night, it wasn’t even necessary people just love to honk there. There actually was a kind of luxury hotel city (Aerocity Delhi) near the airport there, I guess if they’re already used to that much noise being near an airport can be valuable.

There is some advantage for cars and planes in that you don’t need to develop the whole land between the two points you’re interested in traveling between as much as you do for rail, maybe that’s where the price difference is coming from.

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

#159

Post by foxyv »

jjk166 wrote: post #155
thehappypm wrote: post #146

Earlier quoted context omitted.

I don’t know if there’s really that much time overhead. If I’m spending $200 on that rail ticket, I’m gonna arrive at the train station early to account for any issues I have getting there, just like an airport. I find it a little frustrating that people argue that there is zero time overhead in getting to a train station but there’s like three hours with an airplane when in fact, it’s often two hours for airlines an…

For flights you have to go through significant amounts of security which is often highly variable. Further, flights tend to be distinct events. For many routes there may only be one per day, and even for busier routes you usually can't just hop on the next one without significant effects on your travel plans, for example rescheduling connecting flights. Trains on the other hand just keep running, there's going to be…

Shinkansen operates at a frequency of one train every 4 minutes on some of the busier lines. The $200 is mostly for very long single trips. It's mostly used by commuters who get monthly passes for cheap and are refunded by their jobs. I can't even imagine how horrible it would be to fly on an airline every single day. It sounds exhausting.

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

#160

Post by nec4b »

Frieren wrote: post #153
nec4b wrote: post #138

Earlier quoted context omitted.

>> 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?

Are that the average rich person? I know very hard working people that created their companies and got rich, they treated their employees fairly and were smart and capable. They are not your average rich person. Your average rich person is an average person with average intelligence, average knowledge but protected from reality what makes them more gullible and they have a hard time understanding many not so difficul…

>> Your average rich person is an average person with average intelligence, average knowledge

I'm pretty sure the distribution curves for average rich person and average intelligence are not aligned. That is basic biology and statistics.

>> Your anecdotal evidence is confirmation bias for your world view, quite far from reality.

You claim to know what the average is without providing a single citation.

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