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Comment by 40acres | Hacker News Reader

Is there an economic term to describe the type of market that the airline industry seems (from my point of view)?

It seems like operating an airline is such a capital intensive industry that once you've established yourself you can 'ignore' certain norms of competition and innovation.

Commercial air travel doesn't seem to have undergone much innovation since the Concorde failed. Domestic flights don't seem much faster or more comfortable than 10 years ago, and service has arguably gotten worse as usage has continued to increase. Airline travel is still so useful that many customers will simply take what is offered because in many cases travel by other means is not possible.

It does not seem like a monopoly because there are many competitors, but I don't know how to describe what I perceive in market terms.

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Planes don't fly as fast as they can, the key metric that planes optimize for is fuel efficiency. Similarly planes aren't optimized for most comfort - they are optimized for the number of people per mile, as long as it's still comfortable enough.

There is quite a lot of innovation going on in terms of fuel efficiency and minimum comfort - https://www.theicct.org/publications/fuel-efficiency-trends-... https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#Futur...

The result of these innovations are cheap prices -

https://www.theatlantic.com/business/archive/2013/02/how-air...

It’s a highly competitive, cost-optimized market. The entry costs actually aren’t that high, because airplanes are usually leased. Small airlines are always entering and existing the market.

The problem is not airlines ignoring the norms of competition. It’s that people just want the cheapest service possible. Airlines sell seats with more leg room for a modest fee (I paid $30-50 for the flights I took today). It’s always easy to get these upgrades, which means not very many people are willing to pay extra.

It’s like PCs. Why does Lenovo/HP sell so many PCs with garbage screens? People don’t care. They just want these machines to be cheap.

As to lack of perceived improvements, it’s because physics hates aerospace engineers. In half a century, jet airplanes have gotten maybe 50% more efficient (during a time when fuel costs have exploded). Billions and billions of dollars have been spent to achieve those improvements.

It’s always easy to get these upgrades

Maybe I need to try different airlines. I'll pay the $30 (I would seriously pay an extra $100 for an exit row seat), but every time I try to get one of those seats, even months in advance, they're gone. I'm usually on Alaska, but I'd be hard-pressed to believe Alaska customers are just less stingy than others.

I just got one on an otherwise full flight that I booked 3 hours before departure. I fly Spirit/JetBlue/American mostly. The flight was so full they called for volunteers to check bags, but the seat next to me was empty.

The pre-merger Alaska Airlines fleet contains four different variants of the Boeing 737, with one of those (the 737-900) outfitted in either of two seating configurations.

Only the 737-800 and the 737-900 "V2" configuration are outfitted with a dedicated section of extra-legroom seats near the front of the economy cabin. In the others (737-400, 737-700, and 737-900 "V1"), the only way to get additional legroom in the economy cabin is to snag an exit-row or bulkhead seat.

For sake of comparison:

* 737-900 "V1" has two exit rows with additional legroom, and one bulkhead row with additional legroom, for a total of 18 seats, in a 165-seat economy cabin, with additional legroom.

* 737-900 "V2" has two exit rows with additional legroom, and four rows at the front of the economy cabin designated "premium", with 3-4 more inches of legroom compared to non-"premium" non-exit-row seats, for a total of 30 seats, in a 162-seat economy cabin, with additional legroom.

The worst configuration is the 737-700, where one of the exit rows has only two seats each side of the aisle; this brings it down to only 16 economy seats available with additional legroom. The best is the 737-800, which has five rows of "premium" plus two exit rows, for 42 seats with additional legroom.

When you fly what is your #1 criteria? I would argue that for most people it is cost. For a cheaper fare people will give up a lot. If you want comfort then upgrade the business or first class. One of the reasons Concorde failed was the inability to get enough people to pay for speed.

Airlines will focus on what sells and what enables them to turn a profit.

This, and the other replies to my question, seems about right. When I fly the #1 thing I'm looking for is cost, following by # of layover(s) and time of layover. Once I'm actually in the air there is not much that distinguishes Delta , Alaska & Jet Blue for instance. Aside from cost and available routes, my main sticking point between picking airlines has been if they have adequate enough TV service.

I fly frequently from London to New York and San Francisco. The flights are quite fast - but here's the killer: in New York and San Francisco (and London if you aren't going near or via Paddington) - the trip from the Airport to my next destination - {hotel,office,client...} Can take 1/4 to 1/2 of the flight time!

New York is especially bad (2.5 hours at rush hour).

Would I pay a premium for speed of flight? Yes

Do I think that there are enough people to form that use case? Yes!

Will it work? No - the benefit obtained through a fast flight is obliterated by 3rd world airport links into the major airport destinations.

Concorde had a hard beginning - the French and Brits cooperating? On research?! (It uses the French spelling...)

But when you couldn't fly a helicopter to Midtown anymore, or into the City... The clock started ticking. (This last I have from dear old Dad who was in Finance in the Concorde era and through its end)

In NYC you can get from the airport to Manhattan in about 10 minutes with a helicopter flight. There are a few companies that offer it. My friend likes this one:

https://blade.flyblade.com/p/bounce

It's about $200, but if your time is worth a lot to you, it might be worth it, especially since a regular taxi is $60 anyway.

It's an oligopoly, and the term that you're looking for to summarize "changes in service and price do not change utilization much" is "inelastic". Air travel is interesting, because I think it has a sigmoidal elasticity curve - there are a lot of people who simply must fly, a good quantity who will fly if it is affordable, and people who will fly any time anywhere for a cheap enough ticket.

This is why airlines have so many classes - to get the low elasticity travelers to pay as much as possible, while getting as many high-elasticity travelers to fly.

IMO while I don't know the term, what has happened is buyers don't have good transparency on what they are getting for their money, and as a result the market has hyper-optimized for cost. When you aren't sure whether the more expensive ticket is going worth it to you, people take the cheaper ticket.

The hotel industry sort of has this problem too- it's hard to know what you're getting- but the concept of "stars" helps ameliorate the effect somewhat.

What transparency is missing? All the airlines disclose their seating configurations. There's SeatGuru. Google Flights even shows the pitch right in the search results.

SeatGuru is not run by the airlines and is not entirely accurate. It frequently shows configurations that will not match your airline or specific configuration.

If airlines wanted to be transparent and encourage competition, they would disclose the seat measurement config alongside the price.

You're never going to get a perfect guarantee. The airlines have to have the ability to swap aircraft at the last minute and that may mean delivering different pitch than originally shown.

Do passengers want the extra inch or do they want to arrive on time? I'm betting it's the latter.

> Do passengers want the extra inch or do they want to arrive on time? I'm betting it's the latter.

On-time with a partial refund for not getting the seat they'd paid for is an option, too.

The prices shown on airline sites and aggregators like Orbitz don't remotely reflect the actual costs after pseudo-optional fees and taxes.

That's just not true. Go through the purchase flow for a United flight on Orbitz. Taxes are included and the checked-bag fees are prominently disclosed.

I just checked out Orbitz again to confirm.

The list of flights assumes I have zero bags, despite saying "including taxes and fees", with no way to get a list that incorporates a bag selection. The "cheapest" flight on Orbitz for my chosen destination is thus United, but with fairly well buried exceptions like "no carry-on bag" (which I didn't even know airlines restricted at all). If I account for the bag (and carry-on United would've told me I couldn't take) Southwest is actually cheaper.

One of the big airlines I hear a lot of hatred for regarding missing hidden fees is the ULCCs such as Frontier, Spirit, and Allegiant. Bags, snacks, seats with your party, etc. are not included at all in the base fare. The cost you see on those websites are for _a_ seat on that flight and nothing else. Many people, especially if they aren't frequent flyers don't realize that, and find out that the $100/person fare comes out to more like $200/person if they're flying with their family and needs seats together and at least a bag or two.

If you know what you're doing, sure, it's transparent. But the people who fly most often on those carriers are people who never have or rarely do fly.

Who looks at seat dimensions and has a great concept of how comfortable a seat is going to be for them? It's helpful to be able to compare seats but I don't happen to know my femur length and bet I'm not alone. Not arguing that they're not being transparent, just that it's not particularly helpful.

>I don't know the term

"Market for Lemons"

Thank you, this is exactly it.

I think if you’ve taken 1 or 2 economy flights, you should know what it’s like. They’re all the same, and for most people, they just don’t have the disposable income to spend more on a better flight experience, or they would rather spend it on something else.

They’re all the same

Right, and if any of them are different/better, people mostly aren't aware of it. So why would you shell out? If I knew a particular carrier consistently offered an extra four inches of legroom and consistently cost five percent more or whatever, I'd fly that carrier every time. But it's not even consistent within a carrier.

Business/first class of course has great leg room on every carrier, but costs like five hundred percent more.

First class on domestic US flights goes for a much smaller premium than in years past. My usual domestic route is DEN-SFO and first class is usually twice the price of economy—or less. Far smaller difference than it used to be.

AA was selling first class for less than coach on DEN-IAD last week.

The airlines are offering more and more info about exactly what you're buying:

https://www.delta.com/content/www/en_US/traveling-with-us/on...

https://www.united.com/CMS/en-US/products/travelproducts/Pag...

https://exploreamerican.com/maincabinextra/?%20cint=DSP%7C%7...

I would guess most people that need it still won't be able to afford it though.

A ton of airlines now offer economy plus seats with roughly 4 inches of extra legroom (and a few other perks) for a nominal fee ($30-$50 generally).

Last I saw they reserve the right to give you a regular seat & keep the money, if they sold too many economy plus on a particular flight...

> Domestic flights don't seem much faster or more comfortable than 10 years ago

But they are a lot cheaper. And that, it turns out, is what people actually want when they vote with their wallets.

This is key, I think. People - myself included - have decided they'd rather be able to, say, splurge a bit extra on parasailing if it means an uncomfortable flight to get there.

>Domestic flights don't seem much faster or more comfortable than 10 years ago, and service has arguably gotten worse as usage has continued to increase.

It seems like this is a result of an industry "normalizing." Once something becomes mainstream the quality usually goes down but quantity goes up.

Sure the Concorde was innovative, but the ticket prices were extremely high. In the 80's IIRC a round trip ticket was $1000 from the US to the UK. Adjusting for inflation that's around $3k for a flight.

Taking a quick look....today you can get the same flight from 35 different carriers, little slower of course, but for around $600-1000. As much as people complain about leg room and amenities I think most people care more about price and availability.

If you compare today's flight experience and expectations of service to Concorde, you probably should do it against today's business class rates. Which brings you to the same price ranges as Concorde, but with longer flight times.

The Concorde is a bit inapt of a comparison; it had only one class of seating, and was targeted towards business-class travelers. A comparable seat on a modern, slower jumbo would also be in the $2-5k neighborhood, versus sub-$1k for economy fares.

EDIT: So, yes: you can do it for under a grand, but you're not getting the glass of champagne.

>$600-1000

CDG-JFK round-trip can be done for 300 bucks on Norwegian -- it's insane

Business class will still run you min 2.5k though which is what the concorde was offering

The thing to remember about flights is that the airline isn't really making much money on coach. The $/sq ft on first and business is much higher and is the source of nearly all their profit. But there just aren't enough people buying premium seats to fill a plane, so airlines fill the rest of the cabin with filler passengers (coach) who basically pay the airline's cost/sq ft. There are usually plenty of people who want those seats, so there's little need to compete for that business. But they compete hard for the premium travelers and they schedule flights based on anticipated premium demand, not coach demand.

Imagine if five-star restaurants sold leftovers at the end of the night. From the perspective of someone buying those leftovers, it wouldn't seem like the restaurants were competing all that much. That's what's going on with airline coach...you're buying the airline's leftovers from the passengers they actually care about.

Depending on who you ask it's either perfect competition or an oligopoly.

The key is that there is a high barrier to entry.

Maybe, but a lot of airlines start up each year.

https://en.wikipedia.org/wiki/Category:Airlines_by_year_of_e...

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