5 ms·

I seem to recall a booking agency made roughly on average 10 dollars a seat for their most profitable airlines. Airline standards are the direct consequences o

I seem to recall a booking agency made roughly on average 10 dollars a seat for their most profitable airlines. Airline standards are the direct consequences of vote with your wallet. No matter what some claim, 99.999% of people will buy the cheapest ticket possible.

vikramkr 6y ago
Unless the ticket is being reimbursed by somebody else. Hello business travel.
namdnay 6y ago
The GDS makes about 10 dollars per seat. A portion of that (2-5 dollars depending on the negotiation) goes back to the agency The real kick is "full content agreements" - the airline has to promise not to undercut the final fee charged by GDS/Agency. This ensured nice profits for the GDS ecosystem, but airlines are starting to fight back by pulling out of them (and hence increasing prices for indirect bookings)
- NikolaeVarius 6y ago
  I'm having a hard time believing that trend will spread to major airlines, I mean the entire point of the GDS is that it gives everyone a "level" playing field in terms of knowing how to price seats. I mean its the same situation as every man-in-the-middle platform right? You have players who hate paying the middle guy, and try to spin off, but everyone else gets too much value to break off
  - namdnay 6y ago
    It has spread to major airlines, in fact they're the ones pushing for it: LHG, IAG, AFKL are all fighting hard. Their dream is that with stuff like NDC it will become magically possible to have a marketplace without middlemen, we all know that's impossible. But they'll use it as a lever to lower commissions until we hit a new equilibrium
    - lotsofpulp 6y ago
      Why is it impossible to have a marketplace without a middleman? Retailers can show prices on their website, hotels can show prices on theirs, same with airlines?
      - bluGill 6y ago
        The airline shows a price. The middlemen are on the different system that has a higher price - a price higher by enough to account for their profit. Sometimes the middlemen are worth paying. They might be better at searching all your alternatives and so they can find a route that you didn't find at all in your search. They might know something that you didn't think of (yes the non-stop is $100 cheaper, but wouldn't you prefer two 8 hour flights and two hours to walk around an airport over 16 hours in your economy seat?) They might guarantee your cruise doesn't leave without you if your flight is late. Only sometimes though.
      - namdnay 6y ago
        How many people go to a specific hotel website, rather than booking.com or whatever? It’s the same issue for airlines, you don’t want to have to open 10 tabs every time you want to search for an itinerary, so there will always be middlemen. The airlines just want to make sure the middlemen don’t have as much power :)
doublesCs 6y ago
> Airline standards are the direct consequences of vote with your wallet. No matter what some claim, 99.999% of people will buy the cheapest ticket possible. For the airline industry, yes. This isn't true in all industries.
nicolas_t 6y ago
If that were true we wouldn't have 30-50% of a lot of long haul planes reserved for business class
- NikolaeVarius 6y ago
  Business travelers are living in a different world than the rest of us
blantonl 6y ago
No matter what some claim, 99.999% of people will buy the cheapest ticket possible. This is definitely not the case, otherwise airlines like Delta, United, and American wouldn't be in business. Business travel is the money making industry for airlines, with leisure travel being lagniappe revenue. Business travelers book tickets based on convenience of schedule over everything else. Loyalty programs direct that purchase to a specific airline. That is a proven fact and factually dismisses your claim that "99.999% purchase" based on cost.
- NikolaeVarius 6y ago
  Clearly business travel is its own thing, and not related to the rest of us unwashed masses
  - blantonl 6y ago
    It is. The sales executive flying off to his 75th sales call of the year on a fully refundable ticket paid for by his employer is worth literally multiples of you, your wife, and your 3 kids flying off to disney world.
    - robocat 6y ago
      and here’s the thought experiment: if there were no cattle class, how would the airline provide the profitable business class flights? I simply don’t believe one can simplify down the profits as crudely as you have put it.
      - chrisbolt 6y ago
        It’s the other way around, the business class seats subsidize the cheap economy seats. https://www.youtube.com/watch?v=BzB5xtGGsTc https://www.youtube.com/watch?v=BzB5xtGGsTc
  - chrisseaton 6y ago
    Isn't the vast vast majority of flying done for business? People will go on vacation once or maybe twice a year, but fly on business a dozen or more times.
PaulHoule 6y ago
99.999% is a bit high. Maybe it is 95% or something. I find it hard to believe, however, because the usual pattern when I want to fly out of my small airport is as follows. I might find United is $298.44 and so is Delta. American airlines is $301.55. Maybe there is a $375 flight listed with an extra stop on one of the airlines. The next price up is a $700 flight which has nothing obviously special about it, in fact it might be worse with more stops, more delays, and worse timing. (Maybe the expensive flight lets me reschedule or has some other benefit but that's not clear when I am buying the ticket) The market is not giving me any meaningful choice at all through the price mechanism in that two airlines seem to be colluding to give me the exact same price, and the difference between the third is so small that $3.11 is not worth thinking about if you find anything about the American flight preferable to the other two. In theory I could pay $1200 for a first class flight but the first leg of the flight has no first class cabin, and that's a huge jump. Before 2008 there was no "Premium Economy" or other efforts to let people vote with their dollars in a meaningful way. Still it's limited. When I save everybody time and frustration by checking a bag instead of contributing to "rollerbag hell", why I am paying more when I should be getting a discount? Looking at airline pricing shows the rules of microeconomics are being thoroughly violated and I'm not going to believe the claim that "customers won't pay more for a better experience" until somebody hits the STOP button on both the flights and the airline bank accounts and accountants go over every single line and they can tell a story that makes sense. What I see is that customers aren't being offered meaningful choices about their flights, or if they are, only in certain geographies. I was a 737 hater long before the MAX came along so now it's appealing to drive to Syracuse to take Jetblue which is a no Boeing airline. In terms of $'s to the airline it isn't dramatically different than what I'd pay to fly out of Ithaca, but I an now paying with transport costs and maybe an extra night's hotel stay. At ITH the service from the major airlines is undifferentiated (do you want to fly a CRJ-200 or E-145?) other than the hub you go to. Delta's Detroit hub is ideal for the west coast, American's hub is ideal for points south. Somehow they charge the exact same for flights that must cost differently for the airlines so there must be price fixing involved.
- bluGill 6y ago
  checked bags do cost more - they need to pay people to load the planes. Rollerbags slow the line down a bit, but otherwise there isn't much difference, and the people they pay who are slowed down need to be paid anyway even where there isn't a plane at the gate (except end of shift of course). For me American and United are always the same price, but Delta wants me to fly to their Atlanta hub for some reason, while American and United hubs are approximately the same overall flight distance.
rconti 6y ago
Maybe, but they also don't sell a differentiated product. Give me the option to pay the real cost of a comfortable seat, and I'll pay it. No, I don't believe it costs 5x as much. Every single airline sells the same product, more or less. The same 2-3 class system, at the same price differentials, with the same seat width and pitches.

vikramkr 6y ago

Unless the ticket is being reimbursed by somebody else. Hello business travel.

namdnay 6y ago

The GDS makes about 10 dollars per seat. A portion of that (2-5 dollars depending on the negotiation) goes back to the agency The real kick is "full content agreements" - the airline has to promise not to undercut the final fee charged by GDS/Agency. This ensured nice profits for the GDS ecosystem, but airlines are starting to fight back by pulling out of them (and hence increasing prices for indirect bookings)

NikolaeVarius 6y ago
I'm having a hard time believing that trend will spread to major airlines, I mean the entire point of the GDS is that it gives everyone a "level" playing field in terms of knowing how to price seats. I mean its the same situation as every man-in-the-middle platform right? You have players who hate paying the middle guy, and try to spin off, but everyone else gets too much value to break off
- namdnay 6y ago
  It has spread to major airlines, in fact they're the ones pushing for it: LHG, IAG, AFKL are all fighting hard. Their dream is that with stuff like NDC it will become magically possible to have a marketplace without middlemen, we all know that's impossible. But they'll use it as a lever to lower commissions until we hit a new equilibrium
  - lotsofpulp 6y ago
    Why is it impossible to have a marketplace without a middleman? Retailers can show prices on their website, hotels can show prices on theirs, same with airlines?
    - bluGill 6y ago
      The airline shows a price. The middlemen are on the different system that has a higher price - a price higher by enough to account for their profit. Sometimes the middlemen are worth paying. They might be better at searching all your alternatives and so they can find a route that you didn't find at all in your search. They might know something that you didn't think of (yes the non-stop is $100 cheaper, but wouldn't you prefer two 8 hour flights and two hours to walk around an airport over 16 hours in your economy seat?) They might guarantee your cruise doesn't leave without you if your flight is late. Only sometimes though.
    - namdnay 6y ago
      How many people go to a specific hotel website, rather than booking.com or whatever? It’s the same issue for airlines, you don’t want to have to open 10 tabs every time you want to search for an itinerary, so there will always be middlemen. The airlines just want to make sure the middlemen don’t have as much power :)

doublesCs 6y ago

> Airline standards are the direct consequences of vote with your wallet. No matter what some claim, 99.999% of people will buy the cheapest ticket possible. For the airline industry, yes. This isn't true in all industries.

nicolas_t 6y ago

If that were true we wouldn't have 30-50% of a lot of long haul planes reserved for business class

NikolaeVarius 6y ago
Business travelers are living in a different world than the rest of us

blantonl 6y ago

No matter what some claim, 99.999% of people will buy the cheapest ticket possible. This is definitely not the case, otherwise airlines like Delta, United, and American wouldn't be in business. Business travel is the money making industry for airlines, with leisure travel being lagniappe revenue. Business travelers book tickets based on convenience of schedule over everything else. Loyalty programs direct that purchase to a specific airline. That is a proven fact and factually dismisses your claim that "99.999% purchase" based on cost.

NikolaeVarius 6y ago
Clearly business travel is its own thing, and not related to the rest of us unwashed masses
- blantonl 6y ago
  It is. The sales executive flying off to his 75th sales call of the year on a fully refundable ticket paid for by his employer is worth literally multiples of you, your wife, and your 3 kids flying off to disney world.
  - robocat 6y ago
    and here’s the thought experiment: if there were no cattle class, how would the airline provide the profitable business class flights? I simply don’t believe one can simplify down the profits as crudely as you have put it.
    - chrisbolt 6y ago
      It’s the other way around, the business class seats subsidize the cheap economy seats. https://www.youtube.com/watch?v=BzB5xtGGsTc https://www.youtube.com/watch?v=BzB5xtGGsTc
- chrisseaton 6y ago
  Isn't the vast vast majority of flying done for business? People will go on vacation once or maybe twice a year, but fly on business a dozen or more times.

PaulHoule 6y ago

99.999% is a bit high. Maybe it is 95% or something. I find it hard to believe, however, because the usual pattern when I want to fly out of my small airport is as follows. I might find United is $298.44 and so is Delta. American airlines is $301.55. Maybe there is a $375 flight listed with an extra stop on one of the airlines. The next price up is a $700 flight which has nothing obviously special about it, in fact it might be worse with more stops, more delays, and worse timing. (Maybe the expensive flight lets me reschedule or has some other benefit but that's not clear when I am buying the ticket) The market is not giving me any meaningful choice at all through the price mechanism in that two airlines seem to be colluding to give me the exact same price, and the difference between the third is so small that $3.11 is not worth thinking about if you find anything about the American flight preferable to the other two. In theory I could pay $1200 for a first class flight but the first leg of the flight has no first class cabin, and that's a huge jump. Before 2008 there was no "Premium Economy" or other efforts to let people vote with their dollars in a meaningful way. Still it's limited. When I save everybody time and frustration by checking a bag instead of contributing to "rollerbag hell", why I am paying more when I should be getting a discount? Looking at airline pricing shows the rules of microeconomics are being thoroughly violated and I'm not going to believe the claim that "customers won't pay more for a better experience" until somebody hits the STOP button on both the flights and the airline bank accounts and accountants go over every single line and they can tell a story that makes sense. What I see is that customers aren't being offered meaningful choices about their flights, or if they are, only in certain geographies. I was a 737 hater long before the MAX came along so now it's appealing to drive to Syracuse to take Jetblue which is a no Boeing airline. In terms of $'s to the airline it isn't dramatically different than what I'd pay to fly out of Ithaca, but I an now paying with transport costs and maybe an extra night's hotel stay. At ITH the service from the major airlines is undifferentiated (do you want to fly a CRJ-200 or E-145?) other than the hub you go to. Delta's Detroit hub is ideal for the west coast, American's hub is ideal for points south. Somehow they charge the exact same for flights that must cost differently for the airlines so there must be price fixing involved.

bluGill 6y ago
checked bags do cost more - they need to pay people to load the planes. Rollerbags slow the line down a bit, but otherwise there isn't much difference, and the people they pay who are slowed down need to be paid anyway even where there isn't a plane at the gate (except end of shift of course). For me American and United are always the same price, but Delta wants me to fly to their Atlanta hub for some reason, while American and United hubs are approximately the same overall flight distance.

rconti 6y ago

Maybe, but they also don't sell a differentiated product. Give me the option to pay the real cost of a comfortable seat, and I'll pay it. No, I don't believe it costs 5x as much. Every single airline sells the same product, more or less. The same 2-3 class system, at the same price differentials, with the same seat width and pitches.