7 ms·

Is there an economic term to describe the type of market that the airline industry seems (from my point of view)? It seems like operating an airline is such a

Is there an economic term to describe the type of market that the airline industry seems (from my point of view)? It seems like operating an airline is such a capital intensive industry that once you've established yourself you can 'ignore' certain norms of competition and innovation. Commercial air travel doesn't seem to have undergone much innovation since the Concorde failed. Domestic flights don't seem much faster or more comfortable than 10 years ago, and service has arguably gotten worse as usage has continued to increase. Airline travel is still so useful that many customers will simply take what is offered because in many cases travel by other means is not possible. It does not seem like a monopoly because there are many competitors, but I don't know how to describe what I perceive in market terms.

jaggederest 8y ago
It's an oligopoly, and the term that you're looking for to summarize "changes in service and price do not change utilization much" is "inelastic". Air travel is interesting, because I think it has a sigmoidal elasticity curve - there are a lot of people who simply must fly, a good quantity who will fly if it is affordable, and people who will fly any time anywhere for a cheap enough ticket. This is why airlines have so many classes - to get the low elasticity travelers to pay as much as possible, while getting as many high-elasticity travelers to fly.
- deleted 8y ago
  [deleted]
lisper 8y ago
> Domestic flights don't seem much faster or more comfortable than 10 years ago But they are a lot cheaper. And that, it turns out, is what people actually want when they vote with their wallets.
- ceejayoz 8y ago
  This is key, I think. People - myself included - have decided they'd rather be able to, say, splurge a bit extra on parasailing if it means an uncomfortable flight to get there.
ip26 8y ago
IMO while I don't know the term, what has happened is buyers don't have good transparency on what they are getting for their money, and as a result the market has hyper-optimized for cost. When you aren't sure whether the more expensive ticket is going worth it to you, people take the cheaper ticket. The hotel industry sort of has this problem too- it's hard to know what you're getting- but the concept of "stars" helps ameliorate the effect somewhat.
- saryant 8y ago
  What transparency is missing? All the airlines disclose their seating configurations. There's SeatGuru. Google Flights even shows the pitch right in the search results.
  - eeeeeeeeeeeee 8y ago
    SeatGuru is not run by the airlines and is not entirely accurate. It frequently shows configurations that will not match your airline or specific configuration. If airlines wanted to be transparent and encourage competition, they would disclose the seat measurement config alongside the price.
    - saryant 8y ago
      You're never going to get a perfect guarantee. The airlines have to have the ability to swap aircraft at the last minute and that may mean delivering different pitch than originally shown. Do passengers want the extra inch or do they want to arrive on time? I'm betting it's the latter.
      - ceejayoz 8y ago
        > Do passengers want the extra inch or do they want to arrive on time? I'm betting it's the latter. On-time with a partial refund for not getting the seat they'd paid for is an option, too.
  - ceejayoz 8y ago
jsonne 8y ago
Depending on who you ask it's either perfect competition or an oligopoly.
condescendence 8y ago
>Domestic flights don't seem much faster or more comfortable than 10 years ago, and service has arguably gotten worse as usage has continued to increase. It seems like this is a result of an industry "normalizing." Once something becomes mainstream the quality usually goes down but quantity goes up. Sure the Concorde was innovative, but the ticket prices were extremely high. In the 80's IIRC a round trip ticket was $1000 from the US to the UK. Adjusting for inflation that's around $3k for a flight. Taking a quick look....today you can get the same flight from 35 different carriers, little slower of course, but for around $600-1000. As much as people complain about leg room and amenities I think most people care more about price and availability.
- tandr 8y ago
  If you compare today's flight experience and expectations of service to Concorde, you probably should do it against today's business class rates. Which brings you to the same price ranges as Concorde, but with longer flight times.
- rosser 8y ago
  The Concorde is a bit inapt of a comparison; it had only one class of seating, and was targeted towards business-class travelers. A comparable seat on a modern, slower jumbo would also be in the $2-5k neighborhood, versus sub-$1k for economy fares. EDIT: So, yes: you can do it for under a grand, but you're not getting the glass of champagne.
- matthewaveryusa 8y ago
  >$600-1000 CDG-JFK round-trip can be done for 300 bucks on Norwegian -- it's insane Business class will still run you min 2.5k though which is what the concorde was offering
brixon 8y ago
When you fly what is your #1 criteria? I would argue that for most people it is cost. For a cheaper fare people will give up a lot. If you want comfort then upgrade the business or first class. One of the reasons Concorde failed was the inability to get enough people to pay for speed. Airlines will focus on what sells and what enables them to turn a profit.
- 40acres 8y ago
  This, and the other replies to my question, seems about right. When I fly the #1 thing I'm looking for is cost, following by # of layover(s) and time of layover. Once I'm actually in the air there is not much that distinguishes Delta , Alaska & Jet Blue for instance. Aside from cost and available routes, my main sticking point between picking airlines has been if they have adequate enough TV service.
- fadesibert 8y ago
  I fly frequently from London to New York and San Francisco. The flights are quite fast - but here's the killer: in New York and San Francisco (and London if you aren't going near or via Paddington) - the trip from the Airport to my next destination - {hotel,office,client...} Can take 1/4 to 1/2 of the flight time! New York is especially bad (2.5 hours at rush hour). Would I pay a premium for speed of flight? Yes Do I think that there are enough people to form that use case? Yes! Will it work? No - the benefit obtained through a fast flight is obliterated by 3rd world airport links into the major airport destinations. Concorde had a hard beginning - the French and Brits cooperating? On research?! (It uses the French spelling...) But when you couldn't fly a helicopter to Midtown anymore, or into the City... The clock started ticking. (This last I have from dear old Dad who was in Finance in the Concorde era and through its end)
  - jedberg 8y ago
    In NYC you can get from the airport to Manhattan in about 10 minutes with a helicopter flight. There are a few companies that offer it. My friend likes this one: https://blade.flyblade.com/p/bounce https://blade.flyblade.com/p/bounce It's about $200, but if your time is worth a lot to you, it might be worth it, especially since a regular taxi is $60 anyway.
aportnoy 8y ago
The key is that there is a high barrier to entry.
- brixon 8y ago
  Maybe, but a lot of airlines start up each year. https://en.wikipedia.org/wiki/Category:Airlines_by_year_of_establishment https://en.wikipedia.org/wiki/Category:Airlines_by_year_of_e...
Illniyar 8y ago
Planes don't fly as fast as they can, the key metric that planes optimize for is fuel efficiency. Similarly planes aren't optimized for most comfort - they are optimized for the number of people per mile, as long as it's still comfortable enough. There is quite a lot of innovation going on in terms of fuel efficiency and minimum comfort - https://www.theicct.org/publications/fuel-efficiency-trends-new-commercial-jet-aircraft-1960-2014 https://www.theicct.org/publications/fuel-efficiency-trends-... https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#Future https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#Futur... The result of these innovations are cheap prices - https://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/ https://www.theatlantic.com/business/archive/2013/02/how-air...
rayiner 8y ago
It’s a highly competitive, cost-optimized market. The entry costs actually aren’t that high, because airplanes are usually leased. Small airlines are always entering and existing the market. The problem is not airlines ignoring the norms of competition. It’s that people just want the cheapest service possible. Airlines sell seats with more leg room for a modest fee (I paid $30-50 for the flights I took today). It’s always easy to get these upgrades, which means not very many people are willing to pay extra. It’s like PCs. Why does Lenovo/HP sell so many PCs with garbage screens? People don’t care. They just want these machines to be cheap. As to lack of perceived improvements, it’s because physics hates aerospace engineers. In half a century, jet airplanes have gotten maybe 50% more efficient (during a time when fuel costs have exploded). Billions and billions of dollars have been spent to achieve those improvements.
- mikestew 8y ago
  It’s always easy to get these upgrades Maybe I need to try different airlines. I'll pay the $30 (I would seriously pay an extra $100 for an exit row seat), but every time I try to get one of those seats, even months in advance, they're gone. I'm usually on Alaska, but I'd be hard-pressed to believe Alaska customers are just less stingy than others.
  - rayiner 8y ago
    I just got one on an otherwise full flight that I booked 3 hours before departure. I fly Spirit/JetBlue/American mostly. The flight was so full they called for volunteers to check bags, but the seat next to me was empty.
  - ubernostrum 8y ago
    The pre-merger Alaska Airlines fleet contains four different variants of the Boeing 737, with one of those (the 737-900) outfitted in either of two seating configurations. Only the 737-800 and the 737-900 "V2" configuration are outfitted with a dedicated section of extra-legroom seats near the front of the economy cabin. In the others (737-400, 737-700, and 737-900 "V1"), the only way to get additional legroom in the economy cabin is to snag an exit-row or bulkhead seat. For sake of comparison: * 737-900 "V1" has two exit rows with additional legroom, and one bulkhead row with additional legroom, for a total of 18 seats, in a 165-seat economy cabin, with additional legroom. * 737-900 "V2" has two exit rows with additional legroom, and four rows at the front of the economy cabin designated "premium", with 3-4 more inches of legroom compared to non-"premium" non-exit-row seats, for a total of 30 seats, in a 162-seat economy cabin, with additional legroom. The worst configuration is the 737-700, where one of the exit rows has only two seats each side of the aisle; this brings it down to only 16 economy seats available with additional legroom. The best is the 737-800, which has five rows of "premium" plus two exit rows, for 42 seats with additional legroom.
curun1r 8y ago
The thing to remember about flights is that the airline isn't really making much money on coach. The $/sq ft on first and business is much higher and is the source of nearly all their profit. But there just aren't enough people buying premium seats to fill a plane, so airlines fill the rest of the cabin with filler passengers (coach) who basically pay the airline's cost/sq ft. There are usually plenty of people who want those seats, so there's little need to compete for that business. But they compete hard for the premium travelers and they schedule flights based on anticipated premium demand, not coach demand. Imagine if five-star restaurants sold leftovers at the end of the night. From the perspective of someone buying those leftovers, it wouldn't seem like the restaurants were competing all that much. That's what's going on with airline coach...you're buying the airline's leftovers from the passengers they actually care about.

jaggederest 8y ago

It's an oligopoly, and the term that you're looking for to summarize "changes in service and price do not change utilization much" is "inelastic". Air travel is interesting, because I think it has a sigmoidal elasticity curve - there are a lot of people who simply must fly, a good quantity who will fly if it is affordable, and people who will fly any time anywhere for a cheap enough ticket. This is why airlines have so many classes - to get the low elasticity travelers to pay as much as possible, while getting as many high-elasticity travelers to fly.

deleted 8y ago
[deleted]

lisper 8y ago

> Domestic flights don't seem much faster or more comfortable than 10 years ago But they are a lot cheaper. And that, it turns out, is what people actually want when they vote with their wallets.

ceejayoz 8y ago
This is key, I think. People - myself included - have decided they'd rather be able to, say, splurge a bit extra on parasailing if it means an uncomfortable flight to get there.

ip26 8y ago

IMO while I don't know the term, what has happened is buyers don't have good transparency on what they are getting for their money, and as a result the market has hyper-optimized for cost. When you aren't sure whether the more expensive ticket is going worth it to you, people take the cheaper ticket. The hotel industry sort of has this problem too- it's hard to know what you're getting- but the concept of "stars" helps ameliorate the effect somewhat.

saryant 8y ago
What transparency is missing? All the airlines disclose their seating configurations. There's SeatGuru. Google Flights even shows the pitch right in the search results.
- eeeeeeeeeeeee 8y ago
  SeatGuru is not run by the airlines and is not entirely accurate. It frequently shows configurations that will not match your airline or specific configuration. If airlines wanted to be transparent and encourage competition, they would disclose the seat measurement config alongside the price.
  - saryant 8y ago
    You're never going to get a perfect guarantee. The airlines have to have the ability to swap aircraft at the last minute and that may mean delivering different pitch than originally shown. Do passengers want the extra inch or do they want to arrive on time? I'm betting it's the latter.
    - ceejayoz 8y ago
      > Do passengers want the extra inch or do they want to arrive on time? I'm betting it's the latter. On-time with a partial refund for not getting the seat they'd paid for is an option, too.
- ceejayoz 8y ago

jsonne 8y ago

Depending on who you ask it's either perfect competition or an oligopoly.

condescendence 8y ago

>Domestic flights don't seem much faster or more comfortable than 10 years ago, and service has arguably gotten worse as usage has continued to increase. It seems like this is a result of an industry "normalizing." Once something becomes mainstream the quality usually goes down but quantity goes up. Sure the Concorde was innovative, but the ticket prices were extremely high. In the 80's IIRC a round trip ticket was $1000 from the US to the UK. Adjusting for inflation that's around $3k for a flight. Taking a quick look....today you can get the same flight from 35 different carriers, little slower of course, but for around $600-1000. As much as people complain about leg room and amenities I think most people care more about price and availability.

tandr 8y ago
If you compare today's flight experience and expectations of service to Concorde, you probably should do it against today's business class rates. Which brings you to the same price ranges as Concorde, but with longer flight times.
rosser 8y ago
The Concorde is a bit inapt of a comparison; it had only one class of seating, and was targeted towards business-class travelers. A comparable seat on a modern, slower jumbo would also be in the $2-5k neighborhood, versus sub-$1k for economy fares. EDIT: So, yes: you can do it for under a grand, but you're not getting the glass of champagne.
matthewaveryusa 8y ago
>$600-1000 CDG-JFK round-trip can be done for 300 bucks on Norwegian -- it's insane Business class will still run you min 2.5k though which is what the concorde was offering

brixon 8y ago

When you fly what is your #1 criteria? I would argue that for most people it is cost. For a cheaper fare people will give up a lot. If you want comfort then upgrade the business or first class. One of the reasons Concorde failed was the inability to get enough people to pay for speed. Airlines will focus on what sells and what enables them to turn a profit.

40acres 8y ago
This, and the other replies to my question, seems about right. When I fly the #1 thing I'm looking for is cost, following by # of layover(s) and time of layover. Once I'm actually in the air there is not much that distinguishes Delta , Alaska & Jet Blue for instance. Aside from cost and available routes, my main sticking point between picking airlines has been if they have adequate enough TV service.
fadesibert 8y ago
I fly frequently from London to New York and San Francisco. The flights are quite fast - but here's the killer: in New York and San Francisco (and London if you aren't going near or via Paddington) - the trip from the Airport to my next destination - {hotel,office,client...} Can take 1/4 to 1/2 of the flight time! New York is especially bad (2.5 hours at rush hour). Would I pay a premium for speed of flight? Yes Do I think that there are enough people to form that use case? Yes! Will it work? No - the benefit obtained through a fast flight is obliterated by 3rd world airport links into the major airport destinations. Concorde had a hard beginning - the French and Brits cooperating? On research?! (It uses the French spelling...) But when you couldn't fly a helicopter to Midtown anymore, or into the City... The clock started ticking. (This last I have from dear old Dad who was in Finance in the Concorde era and through its end)
- jedberg 8y ago
  In NYC you can get from the airport to Manhattan in about 10 minutes with a helicopter flight. There are a few companies that offer it. My friend likes this one: https://blade.flyblade.com/p/bounce https://blade.flyblade.com/p/bounce It's about $200, but if your time is worth a lot to you, it might be worth it, especially since a regular taxi is $60 anyway.

aportnoy 8y ago

The key is that there is a high barrier to entry.

brixon 8y ago
Maybe, but a lot of airlines start up each year. https://en.wikipedia.org/wiki/Category:Airlines_by_year_of_establishment https://en.wikipedia.org/wiki/Category:Airlines_by_year_of_e...

Illniyar 8y ago

Planes don't fly as fast as they can, the key metric that planes optimize for is fuel efficiency. Similarly planes aren't optimized for most comfort - they are optimized for the number of people per mile, as long as it's still comfortable enough. There is quite a lot of innovation going on in terms of fuel efficiency and minimum comfort - https://www.theicct.org/publications/fuel-efficiency-trends-new-commercial-jet-aircraft-1960-2014 https://www.theicct.org/publications/fuel-efficiency-trends-... https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#Future https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#Futur... The result of these innovations are cheap prices - https://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/ https://www.theatlantic.com/business/archive/2013/02/how-air...

rayiner 8y ago

It’s a highly competitive, cost-optimized market. The entry costs actually aren’t that high, because airplanes are usually leased. Small airlines are always entering and existing the market. The problem is not airlines ignoring the norms of competition. It’s that people just want the cheapest service possible. Airlines sell seats with more leg room for a modest fee (I paid $30-50 for the flights I took today). It’s always easy to get these upgrades, which means not very many people are willing to pay extra. It’s like PCs. Why does Lenovo/HP sell so many PCs with garbage screens? People don’t care. They just want these machines to be cheap. As to lack of perceived improvements, it’s because physics hates aerospace engineers. In half a century, jet airplanes have gotten maybe 50% more efficient (during a time when fuel costs have exploded). Billions and billions of dollars have been spent to achieve those improvements.

mikestew 8y ago
It’s always easy to get these upgrades Maybe I need to try different airlines. I'll pay the $30 (I would seriously pay an extra $100 for an exit row seat), but every time I try to get one of those seats, even months in advance, they're gone. I'm usually on Alaska, but I'd be hard-pressed to believe Alaska customers are just less stingy than others.
- rayiner 8y ago
  I just got one on an otherwise full flight that I booked 3 hours before departure. I fly Spirit/JetBlue/American mostly. The flight was so full they called for volunteers to check bags, but the seat next to me was empty.
- ubernostrum 8y ago
  The pre-merger Alaska Airlines fleet contains four different variants of the Boeing 737, with one of those (the 737-900) outfitted in either of two seating configurations. Only the 737-800 and the 737-900 "V2" configuration are outfitted with a dedicated section of extra-legroom seats near the front of the economy cabin. In the others (737-400, 737-700, and 737-900 "V1"), the only way to get additional legroom in the economy cabin is to snag an exit-row or bulkhead seat. For sake of comparison: * 737-900 "V1" has two exit rows with additional legroom, and one bulkhead row with additional legroom, for a total of 18 seats, in a 165-seat economy cabin, with additional legroom. * 737-900 "V2" has two exit rows with additional legroom, and four rows at the front of the economy cabin designated "premium", with 3-4 more inches of legroom compared to non-"premium" non-exit-row seats, for a total of 30 seats, in a 162-seat economy cabin, with additional legroom. The worst configuration is the 737-700, where one of the exit rows has only two seats each side of the aisle; this brings it down to only 16 economy seats available with additional legroom. The best is the 737-800, which has five rows of "premium" plus two exit rows, for 42 seats with additional legroom.

curun1r 8y ago

The thing to remember about flights is that the airline isn't really making much money on coach. The $/sq ft on first and business is much higher and is the source of nearly all their profit. But there just aren't enough people buying premium seats to fill a plane, so airlines fill the rest of the cabin with filler passengers (coach) who basically pay the airline's cost/sq ft. There are usually plenty of people who want those seats, so there's little need to compete for that business. But they compete hard for the premium travelers and they schedule flights based on anticipated premium demand, not coach demand. Imagine if five-star restaurants sold leftovers at the end of the night. From the perspective of someone buying those leftovers, it wouldn't seem like the restaurants were competing all that much. That's what's going on with airline coach...you're buying the airline's leftovers from the passengers they actually care about.