The United debarcle

[ATLcrew]

several. but perhaps you don't know that airlines are pretty much exempt from any oversight by anyone except select federal entities, al of whom are too busy and bought to give a shit. oh wait! you already knew that.

As opposed to banks, who have so much oversight, right?

[ATLcrew]

sure, they charge monthly fees for certain accounts/depositors and they charge overdraft fees--justified since you are using THEIR money.

Well heck, counselor, it's THEIR airplane.

[3WE]

As much as I vote with TeeVee, against the airlines...we also have to consider that sometimes, consumers have been known to use "schemes" to "scam" the airlines.

The airlines pricing schemes are not that much of a scandal. Turn the clock back 20 years. I'm sure there's a real and logical supply, demand and cost difference for Northwest to fly folks from Baton Rouge to Memphis vs. Baton Rouge to Minneapolis through Memphis...That location was famous for booking beyond, skipping the additional leg and realizing a big savings...So you wind up with empty seats on the planes and turning away folks who needed to go from Memphis to Minni...So hey, let's let the computer track it and penalize folks who cheat.

More recently- we have the "standby scam". Buy a cheap fare, but then deliberately miss your flight and go standby during a higher demand time, when the fare is higher. Again, the consumer is mucking up the airlines expensive scheduling scheme as they try to balance planes and bodies and times and yeah, make some money...Ok, bring on the change fee.

Are the penalties and change fees fair or excessive...is the cable company 29.99 to sign up followed by a 100% increase two years later "right" in the scheme of things...credit card late fees...payday cash advance loans...car payments.

Should everything cost what it costs + 10% profit, or do we let the marketing department tweak things to realize a little more profit. There was a time in my life, I thought that using a 172 and doing all this stuff myself might be cost conscious (as soon as I get a real job). But damn, the insurance rates and keeping all the damn instruments working and it sucks at blowing through ice layers and parking fees and avgas prices and stats about me vs. a crew of two with recurrent simulator training...damn...

AND...do we like the "Green Plan for the future" offered up by a new rising star of a particular political leaning...sounds like a great idea.

[Evan]

I'm sure there's a real and logical supply, demand and cost difference for Northwest to fly folks from Baton Rouge to Memphis vs. Baton Rouge to Minneapolis through Memphis...That location was famous for booking beyond, skipping the additional leg and realizing a big savings...So you wind up with empty seats on the planes and turning away folks who needed to go from Memphis to Minni...

What difference does it make? The airline has already been paid the amount they agreed to for making those flights, but, if the last leg was flown empty, actually realized a greater profit. The airlines are engaged in hypothetical pricing here. "We would have earned more money if you had just booked a more expensive flight to your final intended destination." Wrong. I wouldn't have booked it at all, because the price was too high. In the end, you got some of my money, as opposed to none of it, and you got it on the terms you ageed to.

Are the penalties and change fees fair or excessive...is the cable company 29.99 to sign up followed by a 100% increase two years later "right" in the scheme of things...credit card late fees...payday cash advance loans...car payments.

All of these things are excessive, deceptive and disrespectful. The US economy is becoming a network of snares, hidden fees and lawyering legerdemain. I suppose this is because Americans are so reconciled to being abused by their glorious economy. A certain amount of abuse is considered ok. The general acceptance of a caveat emptor marketplace underwrites a deception-based economy.

A prime example is pricing in the US. You see a tag. It says $9.99. Great, you think, a deal for under $10! But is that what you pay at the register? No. There is sales tax. The thing costs you over $10.
In Europe, the price on the price tag is the entire price that you pay. Tax is included (with a smaller price shown in case you have tax exemption). Why? Because that society has determined that the consumer deserves respect, to not be systematically deceived. This is cultural (although globalization is degrading it).

This is why I think Lufthansa will lose this fight. Sure, European governments are also rife with corruption, but the people are not nearly so passively accepting of industrial abuses.

AND...do we like the "Green Plan for the future" offered up by a new rising star of a particular political leaning...sounds like a great idea.

It's a start. Unfortunately it's happening when we are far too close to the end.

[Gabriel]

Should everything cost what it costs + 10% profit, or do we let the marketing department tweak things to realize a little more profit.

The point is not more than 10% profit but maximize the profit. If I have a plane with 100 seats, if I could, I would sell each of these seats for the higher price that I can. If the last seat gives me only 1% profit and I am unable to sell it for more, I will sell it for 1% profit. If the last seat gives me a loss overall but it gives me $1 over what it will cost me to take this one additional passengers (given that the flight with almost all its costs will take place with or without that last pax), and I can make this pax to pay anything more and I cannot find another pax that will pay anything more, I will sell it for this apparent "loss" because I will end with one more $ in my pocket.

How much does it take to take X pax in a flight? You need to take all costs (including their share of pilots and the CEO). If you don't sell enough tickets at a high-enough price, you will be loosing.
Now, for a flight that is going to be made anyway, and you cannot fill the seats. how much does it take 1 additional passenger in a flight? Maybe 1/3 of its wight worth of fuel (that's the additional fuel you will spend due to the increased induced drag incurred by the increased lift due to the increased airplane weight due to this extra pax) + 1 soda + 1 mini bag of mini pretzels. So let's be conservative and take 300 lb for this pax with his carry on (if he has a checked bag he will pay for that separately), so it's 100 lb of fuel, at say $1.50 per pound (and I am being conservative again) that's $150 + $1 for the snack that's $151. The cost of the snack is fixed and the real cost of the fuel will depend on the length of the flight, but 1/3 the weight in fuel is what you need for a really long flight. So let's say $151 for New York to Los Angeles. That is peanuts! (pun not intended).

Selling the ticket for less than that doesn't make sense because you need to put money on it. Selling all seats for that prices is not sustainable because it barely pays their absolutely variable cost. But if you are making the flight anyway, selling all reaming seats at a little bit above that cost (say at $152) is still a loss, but a lower loss than not selling them, so if you can sell them at $152 and you cannot sell them above that, better sell them.

So this is the problem: To make this flight profitable you need to sell the seats at an AVERAGE PRICES of... let me say $500 split as $151 of absolute variable costs and $349 of the rest of the cos, which is how much does it cost the company at great to fly the plane empty (but with a full crew) divided by the number of seats. But that average includes the ones that you sell below that AND the ones that you DON'T sell (which is like selling them for a value of 0). So somebody has to pay for the ones paying less than $500. So the airline cannot put $500 as the standard price.

Basically, the idea is:
1) Sell each individual seat at the highest price you can find a buyer for it.
2) But sell them at any prices, as long as it is higher than $151.
3) By the way, if the average doesn't come at above $500 in the long term (not in 1 individual flight) we are out of business.

The result is the ticketing craziness that we have. Since the airlines can't negotiate the price with each individual pax, they came up with marketing models and algorithms trying to predict how desperate a person is to take a flight and how much they (or someone) can pay, in function of the route, time of the flight, day of the week, season, and time between the attempted booking and the flight.
And as you can see, if the flight is not filled up you will end up selling tickets for as low as $151 but then you need to sell others well above $500 to make the average. That's how you have so hugely different prices for 1 flight. And this is with one fare. We have not started to talk about basic economy, economy, economy plus...

But it is really nothing new. It is called segmentation (on steroids) if you want to know how it works, and how it worked 3000 years ago, go to the Shuk (Arab market in old Jerusalem) and buy something. They will try to extract every cent out of every customer and will sell the same product to different customers at "personalized" prices. You end up victorious because you ended up paying 1/2 of the ticketed price and they end up happy because they sold it for 2 times what they were willing to sell it for. That is free market.

If we don't like that, the alternative is regulations.

[Evan]

If we don't like that, the alternative is regulations.

We're not discussing pricing, we're discussing after-the-fact re-pricing. Big difference.

But also you are wrong about the bottom of the market. It does make sense to occasionally sell seats below operating costs (at a loss) because it preserves your market share, because that bit of the market could shift over to your competitors. At what point you do this and what degree of loss you incur is part of the complex strategy of race-to-the-bottom economics. But market share is an invaluable commodity that factors into these decisions.

That is, assuming there is competition...

Another commodity, vastly under-rated by the big airlines (hence this thread) is brand equity in the viral information age. Whatever Lufthansa hoped to gain by this has probably been wiped out by the viral negative sentiment they have inspired over the past 24 hours. Brand equity is the result of very expensive marketing efforts, personnel training and dedicated efforts on the part of your people. It only takes one tone-deaf bit of lawyering to defeat those efforts. This may prove to be an expensive lesson for Lufthansa, even if they win the legal battle.

That is, assuming there is competition...

[3WE]

We're not discussing pricing, we're discussing after-the-fact re-pricing. Big difference.

https://www.youtube.com/watch?v=jDh0FiGfgtk

[Gabriel]

We're not discussing pricing, we're discussing after-the-fact re-pricing. Big difference.

I agree that for the Lufthansa case the pricing scheme is not at the core of it, it is what happened when the customer dropped the last leg.

But the discussion branched to the pricing scheme, and this thread at great is not specifically about this Lufthansa case anyway, but about airlines debacle. And the pricing scheme has a lot to do with that.

But also you are wrong about the bottom of the market. It does make sense to occasionally sell seats below operating costs (at a loss) because it preserves your market share, because that bit of the market could shift over to your competitors. At what point you do this and what degree of loss you incur is part of the complex strategy of race-to-the-bottom economics. But market share is an invaluable commodity that factors into these decisions.

Well, more or less. Define occasionally. Define "operating cost".
Tickets are sold "below cost" but not "below the marginal incremental cost that the airline will incur by taking one extra pax in a flight that they are going to do anyway and that has one seat available", which is what I said. Or show me a coast-to-coast ticket for less than $150.
I mean, they can do it for specif promotion for marketing purposes as part of specific marketing campaigns. But I don't think that the "standard" pricing algorithm provides for that.
And I will tell you why:
1- The more you sell the more you lose.
2- You are unlikely to lose a customer to the competition (in the long run) because this time the passenger elected to fly with the competition.
3- If this customer will only fly with you wen you fly him for "below the marginal incremental cost that the airline will incur by taking one extra pax in a flight that they are going to do anyway and that has one seat available", that's mart of the market share that I gladly give away to my competition.

Another commodity, vastly under-rated by the big airlines (hence this thread) is brand equity in the viral information age. Whatever Lufthansa hoped to gain by this has probably been wiped out by the viral negative sentiment they have inspired over the past 24 hours. Brand equity is the result of very expensive marketing efforts, personnel training and dedicated efforts on the part of your people. It only takes one tone-deaf bit of lawyering to defeat those efforts. This may prove to be an expensive lesson for Lufthansa, even if they win the legal battle.

I agree with that, but I feel that it is losing importance. If I want a flight from ELP to MIA then I google "flight ELP to MIA", I don't go to the individual airlines' portals. And I may find in google airlines that I didn't know that existed offering that flight. And sure, if AA and UA offer the flight for a similar price, I would pick AA for the reasons explained before. But if UA has significantly better prices, I would likely and regrettably pick UA (especially if I am going with the family and I have to make the price savings x 5). In other words, I don't think that any meaningful number of prospect passenger will pick another airline instead of Lufthansa because of this incident.

[Evan]

I agree that for the Lufthansa case the pricing scheme is not at the core of it, it is what happened when the customer dropped the last leg.

But the discussion branched to the pricing scheme, and this thread at great is not specifically about this Lufthansa case anyway, but about airlines debacle. And the pricing scheme has a lot to do with that.

Well, more or less. Define occasionally. Define "operating cost".
Tickets are sold "below cost" but not "below the marginal incremental cost that the airline will incur by taking one extra pax in a flight that they are going to do anyway and that has one seat available", which is what I said. Or show me a coast-to-coast ticket for less than $150.
I mean, they can do it for specif promotion for marketing purposes as part of specific marketing campaigns. But I don't think that the "standard" pricing algorithm provides for that.
And I will tell you why:
1- The more you sell the more you lose.
2- You are unlikely to lose a customer to the competition (in the long run) because this time the passenger elected to fly with the competition.
3- If this customer will only fly with you wen you fly him for "below the marginal incremental cost that the airline will incur by taking one extra pax in a flight that they are going to do anyway and that has one seat available", that's mart of the market share that I gladly give away to my competition.

I agree with that, but I feel that it is losing importance. If I want a flight from ELP to MIA then I google "flight ELP to MIA", I don't go to the individual airlines' portals. And I may find in google airlines that I didn't know that existed offering that flight. And sure, if AA and UA offer the flight for a similar price, I would pick AA for the reasons explained before. But if UA has significantly better prices, I would likely and regrettably pick UA (especially if I am going with the family and I have to make the price savings x 5). In other words, I don't think that any meaningful number of prospect passenger will pick another airline instead of Lufthansa because of this incident.

In my experience, airlines on competitive routes generally synch their prices very closely, so price difference is usually not very significant. In those situations, a negative brand perception can be a deal breaker. That's why we have fancy liveries and uniforms and constant IFE branding propaganda. It's also why we don't get more abused.

Where competition is weak or doesn't exist, they can just punch you out, kill your dog and make you sit in poo for whatever price they pull out of their ass that day. The issue isn't just a lack pricing regulation, it's a lack of competition needed to regulate pricing and customer appreciation.

[TeeVee]

Well heck, counselor, it's THEIR airplane.

maybe, if it's not leased. even if it is their plane, that in absolutely NO WAY justifies charging $200 to change your own flight online with ZERO human intervention on the part of the airline and ZERO loss to them. an ass in a seat is an ass in a seat. bought and paid for. back in the day when change fees were invented, there was no "online" and the airline employee had to spend a few minutes on the phone dealing with the request. i absolutely agree that the passenger should pay for this service--a reasonable amount. change fees today VERY often exceed the ENTIRE r/t ticket price! can you honestly defend that? can anyone? my friend, the recently retired manager for aa @ MIA, told me many times that there never was any internal justification for the fees. that is to say, they bore no relationship to aa's costs.

i'd go a step further: say today i change my scheduled flight for may 3rd, 2109 to may 5th, 2019. it's quite likely that in the intervening 2.5 months, they will sell my old seat. they also have one more seat bought and paid for on the later flight. so i did them a favor. maybe they should share in the profits?

[Gabriel]

maybe, if it's not leased. even if it is their plane, that in absolutely NO WAY justifies charging $200 to change your won flight online with ZERO human intervention on the part of the airline and ZERO loss to them. an ass in a seat is an ass in a seat. bought and paid for.

I don't totally agree with that. I mean, forget a second about the number, 2, 20, 200, whatever. Think concept.
You purchased a seat in one specific flight / date. You didn't purchase "a seat in any flight" or a coupon to be used towards the purchase of any seat of any fight.
And if you purchased the seat a couple of weeks ago and now want to change it, maybe in the meantime there was someone who wanted to purchase your seat and could't because, you know, it was already occupied by you. And since we are now 1 day before the flight maybe nobody will buy it now. So we lost the sell of 1 seat.
Before Amazon, it was not normal that people could buy things and return them later. Even today, buy a ticket or a cinema, you can't return it. Buy a ticket for a concert, you cannot even give it to someone else (by the terms, it has your name printed on it and in theory it is not transferable, but in practice no one will ever check).
As far as I am against overbooking (how on Earth it cab be legal to sell the same individual item to 2 different persons???), the other side of the coin for that is that "free flight changes" are not fair either. If the airline wants to offer that as a plus, welcome. But I don't feel it is not justified to charge for that or even not allow it (as some low cost airlines do).
I have the feeling that if all the airlines would have a no overbook & no changes / cancellations / refunds, the prices would go down.

[3WE]

I don't totally agree with that.

I think TeeVee does not object to a rebooking fee and understands that "anything goes" disrupts the beautiful, scientifically-engineered system of sending the right number of seats here and there and potentially runs off a customer needing the service...

But $200 bucks to change MONTHS out when they are 99.9% certain to resell the seat...

The word is "excessive".

[TeeVee]

sorry gabe. maybe outside of the US returns/refunds were scarce. but here in the wonderful capitalist empire of amurikah, refunds have pretty much always been freely given for unused items in the retail setting. heck, i can even remember a time when if you cancelled your flight before departure, you were allowed a refund or a credit FOR THE FULL AMOUNT. now, you can cancel and they give you a credit which can be used for a future ticket. but, they deduct $200 for "changing."

let's take an example: MIA-LGA (a HUGELY popular route that is almost always sold to capacity, even though AA has something like 13 flights per day). i buy my ticket today to leave on may 1st return may 8th, and i pay $241 r/t. 2 days from now, i go online and change my trip to depart may 8th return may 15th. assuming fares are the same, i end up paying $200 for the joy of changing my own ticket. on all 4 flights, there was at least one seat available. so realistically, AA loses nothing since i'll be filling one seat on 2 of the flights no matter which dates.

if the scenario is such that the departure date is much closer, forget the change fee. the fare difference will more than compensate AA for the change, since nowadays, booking closer to departure always means paying a much higher fare.

[ATLcrew]

change fees today VERY often exceed the ENTIRE r/t ticket price! can you honestly defend that? can anyone?

If it helps pay my mortgage, then yeah, I think I can.

[TeeVee]

If it helps pay my mortgage, then yeah, I think I can.

well, at least you were honest enough to admit that your obvious bias disqualifies your opinion.