WSJ Commentary: Addiction to cheap airfares

[C150J]

EDIT -- Link not working...

This is the identical article: http://www.foxbusiness.com/story/ma...addiction-cheap-airfares-causing-travel-ruin/

 

[surreal1221]

Well bummer. . .maybe we can get AE to do an intervention for the poor American masses that don't realize the value of items. Especially transportation by air.

 

[Boris Badenov]

It might be worth remembering that real wages have also declined since 1980. Significantly. Broadly speaking, the future is SWA for the Great Unwashed and NetJets for the people who control the financial system.

Another bummer that might be worth keeping in the back of the ole brainpan is regulation and an on-time Gestapo means higher fares, fewer passengers, possibly bigger planes, and certainly fewer pilots (employed ones anyway).

 

[cfii2007]

The flying public has NO IDEA how fortunate they are to have affordable airfares, schedules and a fairly safe reliable air transportation system.

I just hope when the airlines reduce capacity and raise fares, that it STAYS THAT WAY....such that consistent profits can be maintained.

I'm probably dreaming though............

 

[msmspilot]

Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198 -- which would be about $500 in 1981 dollars adjusted for inflation -- and add-on fees are now the industry norm.

This is wrong. The $198 in 2008 equates to about $82-83 in 1981. So we're paying about $.83 on the dollar instead of $.40 on the dollar as is described in the article.

I don't disagree with the premise of the article, but to make such a blatant error in the third paragraph made it difficult to believe the author had a clue what he was talking about.

 

[Nihon_Ni]

This is wrong. The $198 in 2008 equates to about $82-83 in 1981. So we're paying about $.83 on the dollar instead of $.40 on the dollar as is described in the article.

Ummmm.......

82 / 198 = 41

I think you meant to say we're paying $.83 to the old $2 bill.

(What's that rule about not doing math in public?)

 

[cfii2007]

Either way, it is CHEAPER to fly coast to coast at $200 than drive....not to mention the time saved.

 

[msmspilot]

Ummmm.......

82 / 198 = 41

I think you meant to say we're paying $.83 to the old $2 bill.

(What's that rule about not doing math in public?)

try 82/99 = .8282...

You have to compare 1981 to 1981 and 2008 to 2008. If you'd rather use the 2008 numbers, we're paying 199 and the 1981 price converts to 246 in 2008.

So 199/246 = .8089

Either way, it's about $.81-83 on the dollar. Not $.40 like the article claims.

 

[Nihon_Ni]

Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198 -- which would be about $500 in 1981 dollars adjusted for inflation -- and add-on fees are now the industry norm. It's no wonder airlines are squeezed when we're paying 40 cents on the dollar nearly three decades later.

198 / 500 = .396 or 40 cents on the dollar is what the author is citiing.

Where are you getting your facts that says its 81-83 cents on the dollar? You must be using a different rate of inflation than the author did.

 

[msmspilot]

Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198 -- which would be about $500 in 1981 dollars adjusted for inflation -- and add-on fees are now the industry norm. It's no wonder airlines are squeezed when we're paying 40 cents on the dollar nearly three decades later.

198 / 500 = .396 or 40 cents on the dollar is what the author is citiing.

Where are you getting your facts that says its 81-83 cents on the dollar? You must be using a different rate of inflation than the author did.

The author did the currency conversion backwards. If you can get something in 2008 for $198, the same item would be about $82-83 in 1981 (varies slightly depending on the currency calculator). I'm not debating the guys math with the 198/500. I'm debating whether he has a clue how to use a currency calculator.

Think of it this way: If I made $20K in 2008, and I had had the same job since 1981, and I had gotten raises or cuts based solely on inflation, would I have made more or less in 1981?

The author is saying I would have made about $50K. An inflation calculator says I'd have made about $8K.

 

[msmspilot]

To further clarify:

I used http://www.westegg.com/inflation/ although I checked it with two other calculators and all are within a percent or two of each other.

When I put in $99 in 1981, it says that that would be about $246 in 2007 (latest year it'll calculate for)

When I put in $199 in 2007, it says that would be about $82 in 1981.

199/246 = .8089 and 82/99= .8282...

You have to compare 2007 values to 2007 and 1981 values to 1981. The author does his conversion backwards (he uses a 2008 value and converts it to 1981 and gets a bigger number??!?!?).

The article should read:
Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198 -- which would be about $82 in 1981 dollars adjusted for inflation -- and add-on fees are now the industry norm. It's no wonder airlines are squeezed when we're paying 40 cents on the dollar nearly three decades later.

 

[tonyw]

I got into a discussion of this with a bunch of folks from Germany. They said that the kinds of things that were happening would never happen in Europe.

I explained to him this is because they've cut every single redundancy out of the system, which means that everything has to work perfectly or things get screwed up. You've got them focusing on cost savings because nobody has the balls to tell the American public you have to pay more than $200 for a flight from DC to San Fran.

He said in Europe, we charge what needs to charged and people either pay or don't go.

And I said, well, that's something you can do there, but it doesn't work here. For some reason, the American public thinks it's entitled to $200 one way fares across the country.

And just like that, on cue, someone piped up, $200 each way is outrageous and stormed off in a huff, muttering something about some people having too much money.

I laughed and said, you see what I mean? That guy can't take Greyhound for $200 each way and he's saying it's outrageous.

 

[wheelsup]

You've got them focusing on cost savings because nobody has the balls to tell the American public you have to pay more than $200 for a flight from DC to San Fran.

From the article:

"They can't raise fares because they have no pricing control," Stempler says. "It's not that they don't have the courage; it would be business suicide to fall out of lockstep."

It's not that someone doesn't have the balls, it's that their hands are pretty much tied. They can't raise fares, or they'd lose their plane load of pax.

Another thing that scares me - they are referencing People Express...who went out of business. Doesn't bode well for us!!

Greyhound and other bus companies have introduced shuttles now up and down the east coast, something like $25 for NYC - BOS. 4 hours or something, or very very close to what you'd spend checking into the airport early, waiting on your delayed flight, flying on your delayed flight, and getting to the airport and outside to a taxi or train station. Electrical outlets, bathrooms, and if I remember correctly, internet. It doesn't look good for the airlines.

 

[Nihon_Ni]

Okay, I get it. The way I read your numbers, air travel is about 20% less now than it was in 1981. Right?

 

[Derg]

There's a reason why Greyhound no longer runs the "No Bus Rage" ad

 

[tonyw]

They've got pricing control. The conventional wisdom is that they don't.

Bullcaca.

They can set their fares where they want to.

Okay, so the lowest cost no matter what guys won't fly on that airline.

So be it.

There are very few empty seats left on ANY airline, and there are going to be even fewer with capacity cuts.

Want a seat?

Pay for it.

Don't like it?

Take Greyhound.

I don't see what's keeping an airline from doing that.

They think they might go bankrupt because people won't fly them?

They very well might.

But the current system isn't working so why not try something different.

Insanity is doing the same thing over and over again and expecting different results. That is what the airlines are doing.

Do something different. You may fail, but at least you tried.

 

[wheelsup]

The way I read the article, $29 regional one ways and $99 coast to coast, so $99 each way = $198 back in 1981, which is $480 in todays dollars (or almost $500).

Which is why it says this:

Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198

A bit confusing.

$99 in 2008 was the same as $41 in 1981. But of course the tickets were $99.

Therefore, $41/$99 = about 40 cents on the dollar. If fares were priced what they were relatively in 1981, they would be $480 round trip.

 

[wheelsup]

I don't see what's keeping an airline from doing that.

I know you don't, which is why you aren't a CEO . It's OK, it'll come one day.

Airlines simply try to outlast their rivals, or buy them out. Airline seats are commodities, and perishable. If you had a load of tomatoes that went bad in 3 days, what would you do? Raise the price to make more money off each one but less in total sales or reduce the price and sell as many as you can to raise the most money you can?

I know your answer - raise the price - but you can see how it doesn't make any sense. Or maybe you can't.

 

[flyinguitar]

I just paid $247 for a roundtrip ticket from PDX - DTW with Continental. If I wanted to drive it would cost me over $500 in gas (roundtrip), not counting the wear on my car or the likelihood that the engine would explode in the middle of Nebraska.

I would have gladly paid more, if it would have meant that my phone would suddenly ring with a pilot recruiter on the line offering me a decently-paid airline job.

Boy am I interested to see what things will look like in 10, 20 and 40 years from now.

 

[msmspilot]

The way I read the article, $29 regional one ways and $99 coast to coast, so $99 each way = $198 back in 1981, which is $480 in todays dollars (or almost $500).

Which is why it says this:
A bit confusing.

$99 in 2008 was the same as $41 in 1981. But of course the tickets were $99.

Therefore, $41/$99 = about 40 cents on the dollar. If fares were priced what they were relatively in 1981, they would be $480 round trip.

The article says you could get coast to coast fare for $99 in 1981 and $198 in 2008. The $99 in 1981 is equal (roughly of course) to $246 in 2008. So if the fares were priced as they were in 1981, they'd be about $250ish for the equivalent buying power. The only way to get the 480 is to put the numbers in the inflation calculator where the $198 is the 1981 fare and convert that to 2008.

I'm really trying to compare (using the numbers in the article, I haven't priced any coast to coast flights) a one-way, coast to coast ticket.

2008 --------------1981
$246 --------------$99
$198 --------------$82
The numbers in blue are given in the article. The numbers in black are the equivalent converted for inflation.

Okay, I get it. The way I read your numbers, air travel is about 20% less now than it was in 1981. Right?

Right, in the equivalent buying power thing. The author argues that it's 60% less.

Once again, I don't disagree with the basic premise of the article, but the author seriously hurt his credibility early.