Gunnar Oped: Post Economics of Plane Travel

Flying is expensive.

Flying also isn't expensive. 

http://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/

Flying is the Best Its Ever Been, But It Can Surely Get Better

To quote Donald Trump From the second debate, “Our airports are like from a third-world country." Donald, being international flying connoisseur he is, may actually have point for once. If your flying domestic then your flying experience may involve delays, a 1 in 3 chance of missing your connection flight, expensive food, and the TSA, which does nothing other then slow down your trip to the gate. Also like most markets, flying is less efficient because of regulation, labor costs, and training necessary to fly. Despite that flying is cheaper and more accessible to the general public than any other time in history thanks to much of the regulation being lifted.

http://www.economist.com/blogs/gulliver/2016/09/plane-speaking

http://www.nytimes.com/1997/02/17/business/small-jets-alter-airline-economics.html

Air travel used to be completely government regulated and most airlines then competed on service rather then on price because prices were fixed and expensive. Now with the democratization of air travel and competition on price more and more people are able to afford plane travel. Its important though to think about who those people are and why more of them make flying cheaper

A business traveler will most likely fly regularly and not care about price because the company pays for it. This traveler therefore needs regular routes to the U.S. major cities and a few smaller towns. His demand is consistent and with unlimited cost probably expects better service. He gets better service, which means more staff on planes and a private area up in the front of the plane. Overall he is a low demand, but consistent and pays well and he needs regular flights

A vacationer usually books months in advance and is going for the cheapest seats possible to get to their destination. If its international they will probably fly into a hub airport with many flights in and out before they fly out of the country. They will carry on their luggage to save money, order a minimal amount of food, and expect good service. They provide inconsistent demand, but given different travel seasons like spring break and package deals tons of these travelers can be booked together and squashed into economy. 

Now we have a full plane with tons of people thats safe, reliable, and oh wait the plane is delayed. 

-Mike Pence landing off the runway and disappointingly arriving healthy and uninjured. 

Thanks to the hub and spoke model of flying though planes have to fly when demand is high in very busy hub airports. Thanks to competition the terminal space at these airports is expensive and limited. When wether strikes like today not only is our full plane delayed, but the next scheduled flight meant to be our terminal is delayed. Can they change routes? No, because their demand is not at a different airport. Can they offer anything to the exhausted and unhappy passengers? No again, because flying has low margins thanks to most people on the flights being middle class vacationers who are saving every dime when they travel and only a few high price business travelers. 

This is where the inefficiency of domestic flying in america happens. American cities are too far apart for short flights to travel with low demand. The demand must be squeezed into few airports with high competition and bottlenecks when whether goes south. If planes were able to travel farther cheaply then customers could just take direct flights to their destinations and certain airports could specialize in international flying and others in domestic. More airports means lower cost for companies lower cost for tickets means higher demand. Essentially the biggest improvement to air travel would transitioning from major airports to many minor airports with many choices incases of bad weather.      Also if planes are more efficient then airlines can make regular flights with lower demand. Instead of making a travelers take two flights they can take one to destinations that are not highly demanded. 

Flying has a high opportunity cost that is not accounted for when you pay your ticket months ahead. Being trapped in an airport is a waste of the airlines time and your time. Thats part of why flying feels expensive. 

At the beginning I said flying is cheaper and more accessible than ever and I was right. Just when buying a ticket you have to pay more, much more, and it helps to be a business traveler when you want to have a good experience. Opportunity cost will be factored into your plane ticket there as well as access to a private lounge with a shower while you wait. Once the plane boards you board first and can take your time stowing your things away. You don't have to carry all of those bags on the plane and may pay to put them under the plane. The food is free, you are served first for that too, and so are headphones and movies on a bigger screen. The staff values you the most and you may even have separate bathrooms from the rest of the flyers in economy. If you fly often they may give you free upgrades to these seats, you may pay for those seats with miles, and you may start to enjoy flying rather then see it as a waste of your time.

Flying can therefore get much better and in terms of efficiency when planes travel farther. When range increases with efficiency the necessary demand decreases and it becomes cheap enough for airlines to operate with lower demand, smaller faster, efficient planes, and land in more airports. Instead of hub and spoke model of flying where everyone gets delayed it can be point to point flying. Your destination is the only destination and possibly you have multiple options of where to land and the airport you land at has plenty of low demand terminals. The airport competed for your flight to land there and offered the airline a lower price because now airports are a competitive market. 

http://www.theatlantic.com/video/index/281174/where-did-airline-fees-come-from-and-how-did-they-get-so-bad/

http://www.theatlantic.com/business/archive/2010/11/dear-airline-im-leaving-you/66750/