Airbus reveals aircraft of the future

Two things work. Nose spray (unblocks nose and the whole canals). And sinutab an hour before landing...

I'm no reseller of those I'm just sharing for the ones who've been in horrendous pain like me...

TL;DR version: When telepresence is good enough, the airline passenger business will become an unprofitable niche for specialty companies.

Well here is the reasoning I use, love to hear the counter argument.

The economics of the airline business are dominated by business travelers, they value time over money but there is a ceiling on how much money they will spend. [1]

The cost of air travel is going up for organic reasons (cost of fuel, airport taxes, maintenance burdens) in the presence of a constant pressure on their customers from the business space on margins. In the absence of legislation, the cost of maintaining airport infrastructure for a region is born by the set of people who use it.

The cost of network connectivity is going down, the ability to send more and more data over the existing infrastructure is going up, and the 'experience' of meeting online is going up as well.

I'm witness to the leading edge of the substitution where network connectivity is trumping travel. I get lots of vendors trying to sell me stuff and more and more of them want to 'skype in' and talk to me rather than come by the office.

If I project that out 40 years I imagine that 'network' experience should be equivalent to "being there", and the cost of flying will be unbearable because businesses which fly sales people around will be at a competitive disadvantage.

So the intersection of these trends for business that can be conducted this way will. I am further guessing that telepresence will nail a bunch of things which now cannot be done like this, namely factory inspection and site evaluations. I don't know if you're familiar with Trevor's vision here [2] but I can tell you that shipping a dexterous telepresence robot to China to check on quality control issues in the factory, especially if you can leave it there for multiple re-use, will be much more efficient than 'going' there.

So this combination will, I suspect, "force" businesses out of using airlines. For an airline to retain the business they would have to be 'better' somehow than telepresence. The metrics I can come up with for 'better' are its 'faster', 'cheaper', and 'easier to do often.'

From that, if a majority of the business users that currently use airlines to conduct business stop, then the airlines will lose the ability to charge them premium prices against their time specific needs. If you re-factor the airline business model to rely solely on tourist/casual travel you put them under severe price pressure (flying is a commodity, and even more so if the passengers are willing to schedule around the lowest possible price).

If we can agree that air travel prices will spiral upward due to the combination of higher costs and fewer premium paying passengers, other modes of travel which are currently uneconomical can become so. For example rail service between relatively close (less than 500 miles or 800 km) destinations can offer a superior experience because of reduced scheduling constraints and the ability to dynamically adapt to demand. (easy to add a car to a train, hard to add another 10 rows to an airplane).

Substitution would lead to fewer passengers which would lower aggregate passenger revenue, and since costs are fixed regardless of passenger occupancy, the tension between what you would have to charge to fly someone profitably and the ability to sell that many seats reliably, will (I predict) result in the collapse of what we're calling the 'airline' business in this discussion.

Some demand could be picked up by the now growing telepresence robot market (since it doesn't compete with airlines any more) and unlike the airline business the cost of telepresence robots goes down the more you build rather than up like it does for airlines.

"Yes, the electronic experience will improve, but expect real world attractions that will also improve in intensity. Think Burj Khaliva or Spaceship 2."

At the risk of invoking the simulation argument, if you cannot tell, other than perhaps by acceleration, that you aren't "there" how much more are you willing to pay to actually be there? I won't argue with Spaceship 2, as mention in the original post there will always be a need to get from point a to point b at any cost, which is something a slightly upgraded Spaceship 2 could do, but for the Burj Khaliva? If the difference in cost between having your telepresence robot walk around and check it out vs actually going there was one week of salary per person would you opt to go? how about two weeks salary? Economics tells us there will be some demand but there may not be enough to support a business. Here is a current (and local) example. Consider the basic ingredients for cooking food. (We're talking flour, sugar, spice, etc) These things have gone from having their own aisle in grocery markets to being practically 'specialty' items. People still eat, but economics of cooking your own food vs the convenience of pre-prepared food has reduced the demand for the basics. I doubt they will ever go away completely but the market becomes a specialty market supporting a very limited consumer base. Do I think there would be enough 'reality' tourists who are willing to pay extra to be there to support the infrastructure for flying people around from where they might be to where they might go? No. The cost of maintaining airports, schedules, planes, fuel, maintenance supplies, and crews across the entire country is fixed.

There exists a point where keeping the infrastructure around doesn't make sense for the use by potential customers. That is already true [3] in some small airports that are kept alive by federal subsidies and fees on airline passengers. As passenger levels decrease it will become harder and harder to maintain support for those. Once its cheaper to just build a train which will take you to the nearest city with an airport its game over for small town airports.

The technology for telepresence gets 'good enough' when the ever rising costs of air travel cross the threshold which makes the choice of flying untenable. From that point airline passenger travel decreases until all but specialty airlines have gone out of business. My guess is we'll see it happen before 2050 :-)

[1] http://www.whu.edu/cms/fileadmin/redaktion/LS-RegOek/Working...

[2] http://www.anybot.com/#front

[3] http://www.npr.org/templates/story/story.php?storyId=1201266...

We can make some educated guesses around what happens. The numbers are knowable for the purposes of these guesses we'll just use guesses. Feel free to change them to suit your needs, (a spreadsheet model would be even better).

So lets take the population of the San Francisco Bay area of 7M, 77% of whom are of age to decide to fly to London (18+) of which perhaps 3M have the economic means to decide to do so on an annual basis.

If we assume the non-business travelers will travel with the same frequency they do now (this is the 'hold this variable constant' approach), and we further assume that the amount of revenue that an airline has to make from the route over the course of a year is the same as it is now (we base this on airlines attempting and not always succeeding in maintaining profitable air routes between cities), and we assume that half the passengers are currently travelling for business reasons (this is a simple guess, if you are building a model you should try 25%, 50%, and 75% as guesses, we know it is more than 0% and less than 100%, looking at the whole range as a surface is also interesting).

If our assumptions (guesses) were true (and we have wiggle room there) The cost of airline tickets between SF and LHR would have to nearly double to maintain the same revenue as before. This is because the other costs of the plane don't change as much with half as many passengers, somewhat less fuel (lighter), same maintenance costs, same crew costs, slightly less food cost, same entertainment costs, cleaning costs, airport taxes, etc. This argument sums to the fixed costs overwhelm the variable costs of carrying passengers.

If we assert that business people pay more to fly than tourists do (I think this is a reasonable assertion given that tourists who have the option of booking weeks ahead and adjusting for various things like saturday overnights etc) if the half business people were paying 'full fare coach' their ticket prices are 3 times the price of the tourist tickets. In a worst case scenario that all the tourists got bargains and none of the business travelers do, the revenue is more severely affected by the loss of a business traveler than it is by simply the loss of one ticket sale.

In that scenario the business traveler pays 75% of the revenue and tourists 25% for the year, requiring the tourists to pay 4x what they currently pay to make up the same annual revenue.

Now the zinger, airlines state that they lower prices to attract more passengers. If we look at the converse of this that raising prices would cause more passengers to not travel, we have to verify its not a fallacy. Looking at the complaints the airlines made about the high cost of fuel affecting ticket prices and thus reducing air travel, I'm comfortable believing the claim that higher prices reduces travel.

If the cost of flying to London goes up by 3-4x to account for the revenue lost by the business travelers staying home, it would seem to reduce the total number of passengers still further. Economics suggest that both actors, the airlines and the passengers, will adjust their behaviors to achieve equilibrium.

If we're prognosticating forty years into the future, we ask "Does an equilibrium position exist for recreational air travel?"

To be clear, I don't know if it does. What I was saying is that I can imagine reasons which I consider to be highly probable as to why it wouldn't. Its harder for me to imagine spending a significant amount of my salary to 'casually' visit someone.

I'm very interested in alternate ideas about where air travel is going.

[1] http://www.bayareacensus.ca.gov/bayarea.htm