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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

#21

Post by grugagag »

onlyrealcuzzo wrote: post #9
esafak wrote: post #3

I prefer airlines that don't nickel and dime. In fact, I prefer to fly less since the experience has consistently deteriorated over decades. If you travel internationally you get the added fun of dealing with border agents. And even they have discovered price discrimination, with their VIP lines. All told, is all this chicanery benefiting airlines?

It's made it so that relatively poor people can afford to regularly fly all over the world, which is a relatively new thing. Lowe middle income people in lower middle income countries can afford to fly somewhat regularly, and even internationally, too. Flying used to be just for the rich only as far back as the 60s, and for nobody as far back as 200 years...

Yes, it’s a way to extract something from all buckets. Higher income people you can get more money but with low incoming ones you get a lot more quantity since there are way more lower income people. Laws and regulations prevent people standing up or overloading planes with passengers so this is the alternative.

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

#22

Post by cadamsdotcom »

This always happens when growth of a good or service slows but the provider is still expected to keep delivering growth.

Historically it has led to finding efficiencies - but that takes R&D, not just financial engineering.

In the near future humanity will to do a mix of three things: a) accept that growth is over (it’s not, this is temporary until the next thing is invented), b) find a way to return to the frenzy of innovation that pushed us to expect growth (likely by leaning back in to R&D), and c) legislate the types of squeezing we’ll tolerate (as the EU is doing)

Companies that invest in R&D need to start winning to kickstart growth again. Big companies can do it - eg. Google Gemini is topping leaderboards.

While you wait for a return to R&D, contemplate the miracle of the complex economy that led us to the point where lower middle income people can have a Basic Economy seat on a tin can in the sky.

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

#23

Post by grugagag »

redczar wrote: post #14
onlyrealcuzzo wrote: post #9

Earlier quoted context omitted.

It's made it so that relatively poor people can afford to regularly fly all over the world, which is a relatively new thing. Lowe middle income people in lower middle income countries can afford to fly somewhat regularly, and even internationally, too. Flying used to be just for the rich only as far back as the 60s, and for nobody as far back as 200 years...

The vast majority of the world’s population can’t afford to fly. The relatively poor part of your comment is weird. Flying is still for the rich.

Flying used to be for the ultra rich, people’d gather around them to listen to their plane ride story. The poor in this case are not the poorest but poor comparatively

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

#24

Post by legitster »

Very unpopular opinion, but I personally find price discrimination somewhat appealing. Both me and the richest person on the plane get to the same destination at the same time. And yet he payed 4x as much for the same privilege. It's one of the few forces left in the economy that actually reduces inequality (somewhat).

I'm an absolute cheapskate and I love flying, so I never really fall for the need to upsell. I'll fly with my family and not pay for assigned seats (I've joked with gate agents "I dare you not to sit me next to my children" - in reality they are happy to make sure you sit together anyway).

I get that people value different things differently, but with so much price discrimination the value gets more efficient and you increasingly get exactly what you pay for - no more or less. Which just unlocks the hacker ethos in me.

At the end of the day, you are paying for insanely fast travel across the sky. It's a miracle, let alone at the insanely low prices you can get these days.

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

#25

Post by kube-system »

Zak wrote: post #5
joe_the_user wrote: post #2

I just got back from a week-long vacation where I flew Southwest. It was my first Southwest flight in a while and I will now not fly any other airlines. The rise of "basic economy" seems a lot like the general phenomena of "enshitification" and has a similar motive - degrade your product to squeeze the last drop out of the consumer. And it seems logical that charging by the "degree of shit" in a product means every l…

Southwest just started charging for checked bags after over a decade of being the airline that doesn't do that.

> over a decade

over half a century!

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

#26

Post by grugagag »

Henchman21 wrote: post #12
joe_the_user wrote: post #2

I just got back from a week-long vacation where I flew Southwest. It was my first Southwest flight in a while and I will now not fly any other airlines. The rise of "basic economy" seems a lot like the general phenomena of "enshitification" and has a similar motive - degrade your product to squeeze the last drop out of the consumer. And it seems logical that charging by the "degree of shit" in a product means every l…

I frequently wonder if these folks attempting to squeeze the very life out of the “consumer” (I prefer the phrase “citizen & voter”) ever stop and wonder what will happen when there’s nothing left to squeeze? Because that day is coming sooner rather than later. Its my suspicion that it will end with blood. Rather a lot of it.

As if businesses had more than a few quarters in mind. I really don’t think they care for they’re already extracted the profit when shit hits the fan.

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

#27

Post by tossandthrow »

legitster wrote: post #24

Very unpopular opinion, but I personally find price discrimination somewhat appealing. Both me and the richest person on the plane get to the same destination at the same time. And yet he payed 4x as much for the same privilege. It's one of the few forces left in the economy that actually reduces inequality (somewhat). I'm an absolute cheapskate and I love flying, so I never really fall for the need to upsell. I'll f…

I don't think it is an unpopular opinion at all.

The airline sector had this memory of its "hey days" - but the price has conviniently been forgotten.

From my perspective I would love if the airlines would skip entertainment systems and food on long haul flights. I use my phone for l entertainment, and see the value of airline food as a negative value (i try to fast when I travel, but I am bad at declining food).

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

#28

Post by stego-tech »

So aside from potentially allowing more price-limited consumers the ability to fly via Basic Economy fares, it’s just enshittification of the Aviation Industry: worse products at higher prices.

We really need to step up regulation to disincentivize “infinite growth” as a mindset and prioritize stable returns over time (e.g., dividends and profit sharing). Everything is slowly getting worse and more expensive, and contrary to (seemingly) popular belief there is no “floor” to reach in this foolish pursuit. Businesses and capital will always pursue more money for themselves no matter the cost to consumers, workers, vendors, or governments, unless something incentivizes more societally-healthy behaviors.

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

#29

Post by legitster »

esafak wrote: post #3

I prefer airlines that don't nickel and dime. In fact, I prefer to fly less since the experience has consistently deteriorated over decades. If you travel internationally you get the added fun of dealing with border agents. And even they have discovered price discrimination, with their VIP lines. All told, is all this chicanery benefiting airlines?

> All told, is all this chicanery benefiting airlines?

Yes.

An example is paid baggage. It used to be that stowage space was mostly a waste of capacity on an airplane. But with the help of modern software making coordinating shipping easier, they can make lucrative money shipping cargo on passenger flights.

So encouraging passengers to not bring bags and keeping that capacity for cargo is a feature, not a bug.

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

#30

Post by Zak »

bobthepanda wrote: post #20
hooverd wrote: post #7

Earlier quoted context omitted.

SW seems to be steadily removing everything that differentiated them as a carrier. There's no reason to choose them other than pure price for a route now.

They were able to resist enshittification for a long time because they were actually one of the most profitable airlines and were able to keep their unique culture. Then they had a flight meltdown, lost a bunch of money, and got targeted by activist investors.

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