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One thing that bothers me: Much of the value calculation assumes the seats taken by these lifetime pass holders would always be 100% utilized and never empty. I

One thing that bothers me: Much of the value calculation assumes the seats taken by these lifetime pass holders would always be 100% utilized and never empty. I don't think the opportunity cost is nearly as high as the article states, but I think that AA losing tons of money is more a result of other poor financial decisions than issuing around 60 lifetime passes.

thfuran 10y ago
Not only nonempty, but full fare. On a lot of flights, there are a fair number of people who would get a free upgrade into an empty seat if there were one. But that wouldn't earn AA any more money.
- todd8 10y ago
  Yes, for domestic flights Executive Platinum flyers (basically 100K miles or more each year) get upgraded to any open first class seats for free. At other levels (50K+ or 25K+) can also upgrade to available empty first class seats, but it can cost a small amount.
  - deleted 10y ago
    [deleted]
noonespecial 10y ago
Taxes and airport fees are easily 20% (and that's just for US domestic) of the cost of a ticket which the airline had to eat every time these golden ticket holders flew (or even booked?). These fees unpredictably and radically increased over the time since the golden tickets were issued as well. There's more in the soup than just the marginal cost of the physical seat occupation.
- scarmig 10y ago
  Do the taxes and fees scale linearly with the cost of the ticket? I would guess that as seats become more expensive, the amount taxes and fees comprise of the total goes down.
  - delinka 10y ago
    Are taxes a flate rate, or a percentage?
    - ghaff 10y ago
      Fees and taxes are a mix though, at least with domestic coach, they scale to within a few percentage points with the price of the ticket--about 15% overall. International has quite a few more fees. Overall they added up to about 25% with a recent US-UK flight.
      - ubernostrum 10y ago
        British Airways is notorious for its "fuel surcharge", which is not a government-imposed tax. It's just an extra fee they tack on to make sure the low advertised ticket price ends up costing you enough for them to make a profit. The worst is when you use frequent-flier miles to book with them; you still have to pay the "fuel" surcharge, which guarantees they get an amount, in cash, equal to an economy-class fare even for your "free" ticket.
        gubby 10y ago
        The first part is not true. When you look at flights on BA.com, in their journey planner, that price is the final price, to the penny.
- waqf 10y ago
  The main "fee" that has radically increased is the fuel surcharge, which is not a tax payable to the government, it's a bullshit added fee imposed by airlines which may or may not correspond in some way to some cost they have. It would be more reasonable just to say that the opportunity cost of a free seat they gave away in the past is more than the airlines expected for various reasons (higher load factors, higher ticket prices).

thfuran 10y ago

Not only nonempty, but full fare. On a lot of flights, there are a fair number of people who would get a free upgrade into an empty seat if there were one. But that wouldn't earn AA any more money.

todd8 10y ago
Yes, for domestic flights Executive Platinum flyers (basically 100K miles or more each year) get upgraded to any open first class seats for free. At other levels (50K+ or 25K+) can also upgrade to available empty first class seats, but it can cost a small amount.
- deleted 10y ago
  [deleted]

noonespecial 10y ago

Taxes and airport fees are easily 20% (and that's just for US domestic) of the cost of a ticket which the airline had to eat every time these golden ticket holders flew (or even booked?). These fees unpredictably and radically increased over the time since the golden tickets were issued as well. There's more in the soup than just the marginal cost of the physical seat occupation.

scarmig 10y ago
Do the taxes and fees scale linearly with the cost of the ticket? I would guess that as seats become more expensive, the amount taxes and fees comprise of the total goes down.
- delinka 10y ago
  Are taxes a flate rate, or a percentage?
  - ghaff 10y ago
    Fees and taxes are a mix though, at least with domestic coach, they scale to within a few percentage points with the price of the ticket--about 15% overall. International has quite a few more fees. Overall they added up to about 25% with a recent US-UK flight.
    - ubernostrum 10y ago
      British Airways is notorious for its "fuel surcharge", which is not a government-imposed tax. It's just an extra fee they tack on to make sure the low advertised ticket price ends up costing you enough for them to make a profit. The worst is when you use frequent-flier miles to book with them; you still have to pay the "fuel" surcharge, which guarantees they get an amount, in cash, equal to an economy-class fare even for your "free" ticket.
      - gubby 10y ago
        The first part is not true. When you look at flights on BA.com, in their journey planner, that price is the final price, to the penny.
waqf 10y ago
The main "fee" that has radically increased is the fuel surcharge, which is not a tax payable to the government, it's a bullshit added fee imposed by airlines which may or may not correspond in some way to some cost they have. It would be more reasonable just to say that the opportunity cost of a free seat they gave away in the past is more than the airlines expected for various reasons (higher load factors, higher ticket prices).