4 ms·

Can someone explain the harm this causes the airlines? I get there's a bit of an opportunity cost because they'll have an empty seat, but apart from that? I fee

by rtpg 12y ago

Can someone explain the harm this causes the airlines? I get there's a bit of an opportunity cost because they'll have an empty seat, but apart from that? I feel there's something more here

butwhy 12y ago
You mean besides the fact that they will make less money off fares that people wouldn't have found if it was not for this site?
- benguild 12y ago
  It seems like they use the higher fares to the middle destination to compensate for the higher costs per person of the less popular leg. It's all a complicated algorithm but they have to provide reasonably reliable flights to all of the destinations that they serve in case someone gets bumped. (or they'll have to pay out huge fines to each passenger.)
  - apendleton 12y ago
    I think this relies on the arguably-faulty assumption that ticket prices are based on airlines' costs in delivering the service. Airlines' costs probably set the floor for ticket prices most (but not all) of the time, but don't have much to do with the typical prices. This obvious when you look at the cost of holiday travel: planes don't become twice as expensive to fly because it's Christmas. What actual determines ticket price is mainly the supply and demand around trips between a pair of destinations (like with any other market). Lots of people want to move between DC and New York, and lots of them are business people who can afford to pay a lot, so the market can support a high price for this city pair. This isn't true of, say, DC and Yonkers. What's key, also, is that the layover cities (setting aside people doing the "hidden city" thing) are largely an implementation detail; if you're going from DC to Yonkers, you're comparing the flights that go through New York to flights that go through Philly directly on price (assuming about equal convenience), and you're going to pick the cheapest one. This means market forces are going to drive these prices to be similar, even if the DC->Philly market is radically different from the DC->NYC market. The consequence is weird, unintuitive situations where a flight to the intermediate city can be more expensive than one to the final destination, if market forces are such that the market can typically support a higher price for flights to that intermediate city than they can to the ultimate destination city. Hidden city travelers take advantage of the cost disparity between the markets -- it's a sort of arbitrage.
    - baddox 12y ago
      In simpler terms, it's textbook price discrimination. For any given route, there are potential customers willing to pay different prices for that route. If the airline offers the maximum price to everyone they lose lots of sales. If they offer the lowest price to everyone, they lose potential revenue from all those people who would have paid more. http://en.m.wikipedia.org/wiki/Price_discrimination http://en.m.wikipedia.org/wiki/Price_discrimination
ibejoeb 12y ago
That's not a loss; it's just not an opportunity to double dip. The buyer still bought the seat. There's just nobody in it.
- deleted 12y ago
  [deleted]
asdfaoeu 12y ago
Their issue is otherwise that person would have generally brought the more expensive direct fair.
beejiu 12y ago
The airport will have to pay airport tax at the airport the passenger leaves, which could be more than at the destination proper.
- tacticus 12y ago
  aren't landing fees charged for all pax landing including those who will transfer.
Lost_BiomedE 12y ago
The only thing I can think of is on subsidized flights to places like las vegas. If your destination isn't actually vegas but the supposed end point is, I can see it possibly getting hairy. A bit of a stretch though.
noonespecial 12y ago
I suspect the airlines use an algorithm to maximize the prices the tickets sell for. This will have absolutely nothing to do with how much it actually costs the airline to provide the service. It will instead be based on some crazy mix of supply, demand, competitors prices, time until flight (to allow better prediction) etc. Some routes will lose money, some will be cash-cows. The algorithm balances it all out for a net profit. Enter an anti-algorithm that starts mucking with all of the carefully balanced numbers to do an optimization of its own and you end up with very unhappy airlines.
jowiar 12y ago
I think the failure mode is probably the most serious harm - even more than pricing. What service is the airline contractually / in the court of public opinion obligated to provide you in the case of weather?

by rtpg 12y ago

Can someone explain the harm this causes the airlines? I get there's a bit of an opportunity cost because they'll have an empty seat, but apart from that? I feel there's something more here

butwhy 12y ago

You mean besides the fact that they will make less money off fares that people wouldn't have found if it was not for this site?

benguild 12y ago
It seems like they use the higher fares to the middle destination to compensate for the higher costs per person of the less popular leg. It's all a complicated algorithm but they have to provide reasonably reliable flights to all of the destinations that they serve in case someone gets bumped. (or they'll have to pay out huge fines to each passenger.)
- apendleton 12y ago
  I think this relies on the arguably-faulty assumption that ticket prices are based on airlines' costs in delivering the service. Airlines' costs probably set the floor for ticket prices most (but not all) of the time, but don't have much to do with the typical prices. This obvious when you look at the cost of holiday travel: planes don't become twice as expensive to fly because it's Christmas. What actual determines ticket price is mainly the supply and demand around trips between a pair of destinations (like with any other market). Lots of people want to move between DC and New York, and lots of them are business people who can afford to pay a lot, so the market can support a high price for this city pair. This isn't true of, say, DC and Yonkers. What's key, also, is that the layover cities (setting aside people doing the "hidden city" thing) are largely an implementation detail; if you're going from DC to Yonkers, you're comparing the flights that go through New York to flights that go through Philly directly on price (assuming about equal convenience), and you're going to pick the cheapest one. This means market forces are going to drive these prices to be similar, even if the DC->Philly market is radically different from the DC->NYC market. The consequence is weird, unintuitive situations where a flight to the intermediate city can be more expensive than one to the final destination, if market forces are such that the market can typically support a higher price for flights to that intermediate city than they can to the ultimate destination city. Hidden city travelers take advantage of the cost disparity between the markets -- it's a sort of arbitrage.
  - baddox 12y ago
    In simpler terms, it's textbook price discrimination. For any given route, there are potential customers willing to pay different prices for that route. If the airline offers the maximum price to everyone they lose lots of sales. If they offer the lowest price to everyone, they lose potential revenue from all those people who would have paid more. http://en.m.wikipedia.org/wiki/Price_discrimination http://en.m.wikipedia.org/wiki/Price_discrimination

ibejoeb 12y ago

That's not a loss; it's just not an opportunity to double dip. The buyer still bought the seat. There's just nobody in it.

deleted 12y ago
[deleted]

asdfaoeu 12y ago

Their issue is otherwise that person would have generally brought the more expensive direct fair.

beejiu 12y ago

The airport will have to pay airport tax at the airport the passenger leaves, which could be more than at the destination proper.

tacticus 12y ago
aren't landing fees charged for all pax landing including those who will transfer.

Lost_BiomedE 12y ago

The only thing I can think of is on subsidized flights to places like las vegas. If your destination isn't actually vegas but the supposed end point is, I can see it possibly getting hairy. A bit of a stretch though.

noonespecial 12y ago

I suspect the airlines use an algorithm to maximize the prices the tickets sell for. This will have absolutely nothing to do with how much it actually costs the airline to provide the service. It will instead be based on some crazy mix of supply, demand, competitors prices, time until flight (to allow better prediction) etc. Some routes will lose money, some will be cash-cows. The algorithm balances it all out for a net profit. Enter an anti-algorithm that starts mucking with all of the carefully balanced numbers to do an optimization of its own and you end up with very unhappy airlines.

jowiar 12y ago

I think the failure mode is probably the most serious harm - even more than pricing. What service is the airline contractually / in the court of public opinion obligated to provide you in the case of weather?