Airlines make more money from mileage programs than from flying planes
theatlantic.com
theatlantic.com
That makes it sound like air travel was great before free markets stepped in. The real cost of air travel fell by about half since then. Before deregulation, there weren't as many competitive incentives, and airlines couldn't experiment with routes. Air travel became much more popular and got much safer (this might be a coincidence). Granted, service got worse, but you can still buy service at 2x the price in first class. People just don't.
There are probably a bit too few customer and worker protections, but on the whole, airline deregulation shows just how bad command economies are at planning and allocating resources.
In this era, it was commonplace to fly with only a few passengers aboard. Full flights were rare. Immediately after deregulation, the flights became routinely full.
I.e. the airlines became far more efficient and served the flying public much better.
the benefits to society is in terms of reduced fuel consumption, only because that’s directly aligned with the airline’s profits.
> the benefits to society is in terms of reduced fuel consumption, only because that’s directly aligned with the airline’s profits
Companies don't burn fuel for fun. The fuel is about 40% of the cost of your ticket. Increased fuel efficiency is the major driver of new airline designs.
FTA: "Worse still, without mandated service, cities and regions across the country have lost commercial air service"
It sounds like planes stopped being directed to where customers were and no longer fly to where they wanted to go in many instances. This is not a win for the consumer.
Then there is gonna be a gold rush of airline startups leading to amazing innovation, offers and low prices for consumers. Unless your government intervenes and regulates the market into a monopoly of incumbents, of course.
> Corporations are authoritarian, tyrannical institutions
Corporations are at the mercy of their consumers and investors. They get toppled every day. Remember Nokia? Motorola? IBM? Zoom? Heck even Intel lately?
is not at all the same thing as having a choice.
Yes, because nobody wants to run a business at a loss.
> It sounds like planes stopped being directed to where customers were
You're assuming the airlines are stupid. The fact that the airplanes were often nearly empty under regulation and nearly always full when unregulated is pretty strong evidence they were serving a far larger number of customers.
Which is why some important services (like the post office) shouldn't be run as businesses.
> The fact that the airplanes were often nearly empty under regulation and nearly always full when unregulated is pretty strong evidence they were serving a far larger number of customers.
They are serving a far larger number of customers in areas A and B while now serving zero customers in areas C D E F and G. It might be far better if fewer people in areas A and B could fly if it meant that more people in the other areas could.
Airlines aren't stupid they are just doing everything they can to deliver the least to the public while charging the most they can extract from the public. Also, it isn't as if the changes airlines made to fill up seats couldn't have happened under regulation, or even that they never would have.
> they are just doing everything they can to deliver the least to the public while charging the most they can extract from the public
If you are sure they are gouging and making excessive profits, buy stock in the airlines and get your share.
> it isn't as if the changes airlines made to fill up seats couldn't have happened under regulation, or even that they never would have
They had 40 years to fix it and never did. The airlines fixed it overnight.
Yeah, I suggesting that at the very least it could be, if it means more Americans have access to an airport and airlines served a larger percentage of the country as opposed to only the areas that generated the most profit for them.
> If you are sure they are gouging and making excessive profits, buy stock in the airlines and get your share.
This wouldn't be the worst time. They suffered during the worst of the pandemic but are profitable this year. They'll be looking to claw back the profits they missed too so I expect prices and fees to continue to soar.
This exact kind of logic was why, during communism here in Eastern Europe, we couldn’t find anything in stores: the government in its infinite wisdom was deciding who should build what and how much. Because the greedy companies would’ve built only whatever was profitable for them.
The predictable end-result? We were starving looking at empty shelves, while greedy capitalists in western countries were spoiling the consumers for choice.
Why would it mean that? It obviously didn’t work that way before deregulation and afterwards air travel became much more accessible to more people
How "might" it be "far better" to the public at large for airlines to serve fewer people at a higher cost?
> Airlines aren't stupid they are just doing everything they can to deliver the least to the public while charging the most they can extract from the public.
If they did as you suggest, they'd be demonstrably and measurably delivering FAR less to the public while charging even more money. You're arguing in both directions!
For the same kinds of reasons it's better for the post office to serve people in remote areas at higher cost as opposed to leaving them without service and cut off. The same reasons why it's better for more Americans to have access to broadband, not just the Americans who live in the areas that would make ISPs the most profit. It can be worth it to spend more money when it means providing access to important services to more Americans vs a select few.
> If they did as you suggest, they'd be demonstrably and measurably delivering FAR less to the public while charging even more money.
Which is exactly the case. They ARE delivering less. Less access by only providing service to the locations which give them the most profit. Less leg room so that they can cram more people into every flight. Less service by cutting staff. Giving passengers fewer options/less choice. Allowing less baggage. Flights are increasingly canceled and delayed. Customer satisfaction gets lower and lower all the time. They are giving us less.
They are also charging more and more. Airline tickets are skyrocketing, outpacing inflation. Even as the service airlines provide keeps getting worse and worse, the prices keep getting higher, and higher but there are also the endless bullshit fees for everything they can think of (https://www.elliott.org/on-travel/hidden-airline-fees-are-ev...) which are often hidden.
They are serving far more people at far lower ticket prices than when they were regulated. I.e. deregulation enabled them to put the planes where the people are.
Do you know how much it costs to fly a jetliner? Why does it make sense to you that a 767 should fly into a rural airport to pick up 3 passengers?
These examples are not demonstrative of what you are arguing. If you were to instead propose "closing half of all UPS stores in densely populated cities and reallocating them to rural environments" it would be an apt comparison, and equally illogical.
There is an argument to be had (maybe) about expanded airline access for less populated geos. There is only an asinine argument to be had about doing that at the cost of reduced service for major population centers.
Congress very specifically, by design, does NOT represent the will of the people. It represents the will of land area. Even the part that was originally supposed to be representative of population no longer is due to shenanigans, and also over-represents land instead of people. We probably shouldn’t get into the pros and cons of this system here, but I did want to correct your fundamental misunderstanding.
Check out the 5 year chart of Delta stock. It's gone from $60 to $38. I'm wondering what happened to all that profit you alleged.
https://www.transportation.gov/policy/aviation-policy/small-...
So you have an industry that periodically starts a fare war that requires federal bailouts.
The airline would go bankrupt, the shareholders would lose their investment, the bondholders would own the new corp, and perhaps the aircraft fleet would get a new livery.
American airline tickets contain a 7.5% excise tax, $5.60 per-trip September 11th fee and another excise tax of $4 per flight segment. (That's in addition to the usual sales, payroll and corporate taxes.) Taking just the former, I'm curious what the net give/take ratio is. Because it might be argued that we run our airlines as an indirect tax on high earners to fund the jobs program that is the TSA.
Yeah, that’s the magic of capitalism. You make society more efficient and get paid for that.
You say that being crammed into planes isn’t a benefit. But the opportunity costs should be taken into account. Every resource not spent on airlines is a resource spent on something else.
capitalism can also be very harmful and inefficient for society. companies draining aquifers and producing tons of disposable plastic bottles to sell people that water for profits is a net negative for modern society. that money should go towards improving our water infrastructure so no one feels that their water is unclean. so much plastic pollution is the result of capitalism too.
It certainly was magical after the fall of communism in Eastern Europe to be able to visit capitalist countries and wonder at the shelves full of products and the countless affordable offers.
Starving under communism on the other hand was not magical at all. We were told incessantly that we were making the world a better place, improving the society unlike the evil capitalism that was destroying everything - but we were starving.
Funny enough the capitalist countries looked better and were less polluted too. Turns out rich societies tend to care more about the environment and invest accordingly too.
you get paid for giving people what they want, not necessarily making society more efficient. It's more profitable to sell a car to everyone than it is to sell them bicycles, even if the latter is "more efficient" in terms of space, mineral and fossil fuel resource usage, pollution, health of users...
and God forbid you just tell people to walk.
I used to work at H&M - getting low quality disposable clothing from Bangladesh isn't "more efficient" then buying a sewing machine and making your own clothing, at least not if you consider transport or environmental costs. But people are lazy, and they're easily bored, and they like "new" looking things, so H&M keeps on selling clothes.
I guess basically what I'm getting at is tragedy of the commons. You let people mindlessly pursue their short term interests, it doesn't necessarily lead to efficient behavior at the aggregate level.
Arguably what has made society more efficient, at least for automobiles, has not been "capitalism", but government regulation - safety, environmental, and cutting down on drunk driving. If you consider "dying en route" to be "inefficient", then you'd agree that while just building nicer looking cars with bigger tailfins to please the market didn't really do much to reduce this inefficiency, government mandating bumpers and seatbelts and airbags did.
But why stop there?! Cultivate your own cotton, make your own cloth. Mine and smelt your own iron. Cut the woods and build your tools, then build your sewing needles from scratch.
Funny enough during communism here it was close to impossible to find modern sewing machines - they were the product of the evil capitalist countries, of course. So the old foot-operated Singers were selling at quite the premium.
And yes, we did walk quite a lot - car production and gas distribution in a planned economy meant tens of years on waiting lists.
It might not be more efficient environmentally but it’s certainly more efficient economically (from the perspective of consumers in rich countries)
> After a relatively short period of fierce competition, the deregulated era quickly turned to consolidation and cost-cutting, as dozens of airlines either went bankrupt or were acquired.
> Deregulation even failed to deliver the one thing it is sometimes credited with: lowering prices. Airfare did get cheaper in the years after the 1978 deregulation law. But the cost of flying had already been falling before deregulation, and it kept falling after at about the same rate.
What a bizarre argument, that absolutely demands more examination than a throwaway line upon which the entire premise of the piece hinges.
There’s lots of reasons why fares would be falling in the early days that you wouldn’t expect to continue for decades. Yet the author seems content to pretend there’s some mysterious factor that causes prices to fall for decades that we can infer from just a few year’s data. From first principles, you should always expect that regulation increases prices and the burden of proof is to argue why it would not. Embarrassing that the author is a professor and didn’t bother making a proper argument.
A key argument that led to deregulators winning is showing that intra-state fares—which were not federally regulated—were about 40% cheaper than one might expect when comparing to interstate. Anyway, there are articles that go into various reasons why deregulation very probably substantially decreases fares.
I don’t see how that is true.
Note: I'm not saying anything about cost/benefit. It could definitely be true that the benefits are well worth the cost. And it could also be true that a benefit is a lowering of an expense somewhere else lowering overall prices. (which is the thing that is not obvious and need to be explained) But there is a cost that needs to be covered by something. And that cost is usually going to result in increased prices in one form or another.
Some regulation may lead to negligible higher prices, so it bears asking not just is there an effect, but what is the magnitude of the effect. If minuscule, then we can ignore it.
Even these regulations can increase prices, for example by driving market consolidation or reducing price transparency and increasing overhead as people devise convoluted workarounds.
Price controls also have a tendency to create shortages, causing the product to only be available via black markets that carry a risk premium (and so high prices).
> Some regulation may lead to negligible higher prices, so it bears asking not just is there an effect, but what is the magnitude of the effect. If minuscule, then we can ignore it.
A regulation setting a maximum price of a trillion dollars would have negligible negative impact because nobody would charge that much anyway, but it would also have negligible positive impact because nobody would charge that much anyway. You can obviously pass a regulation that does nothing and then it does nothing.
Customers prefer lower prices all else equal, so that's what they'll choose when all of the options are on the table. Prohibiting certain things only takes options away. If they weren't the lowest cost options to begin with then prices may not increase, but then you have to ask why anybody would have chosen that to begin with over the thing that costs less. If the thing you prohibit was the lowest cost option, prices go up.
Or (as they occasionally do) they can achieve the complete opposite. Making such an argument (from both sides) completely worthless without additional context.
But the people who have time for that are the incumbents, so you end up with rules that on their face are supposed to help the little guy and in actual fact do quite the opposite.
Here's an example. It's a common trope that consumption taxes hurt the poor because they spend a higher proportion of their income so we need to use income tax. But if you look at the numbers, the upper middle class spends the large majority of their income too. You don't get to people who only spend a small fraction of their income until you're into the investment class -- and those people don't pay income tax either. Partially because of transfer pricing and things like that, but at root because they reinvest whatever they don't spend and business expenses are tax deductible. So the claim is BS.
Meanwhile the huge advantage of a consumption tax is that it's hard to avoid. What rich people actually do when there is an income tax is minimize their "income" and buy on credit, which in many cases lowers their taxable income even more if the interest is tax deductible. Whereas with a consumption tax, if you want that yacht you're paying the tax whether you took out a loan for it or not.
So the powerful put out this propaganda that the tax they would actually have to pay is the one that hurts the poor and the one they have many ways to avoid is the one we need to use. But ordinary people aren't all that familiar with how rich people accounting works, so they buy that theory and fight against a change that could shift more of the tax burden from the middle class to the rich. There are also a bunch of things about how the income tax on capital gains benefits not only rich investors but huge conglomerates, on and on.
So unless you have some way to counter this information asymmetry -- and as yet this appears to be an unsolved problem -- the default presumption has to be that a given regulation is inefficient or corrupt. Because most of them are.
No increase in expenses.
1) acquire airplanes
2) acquire pilots
3) plan routes
4) set prices
5) acquire customers
Seems to me regulations that set prices actually save a step.
Cars are a good example. They've been dropping in price historically as the government adds on more regulation.
The funny thing is that this is being brought up again and again as an argument against regulation. You'd think the smart business people would know some economics, so they are either lying or not that smart.
OTH if they for instance increase safety longterm you might expect demand for air travel to increase.
It doesn't need to be higher prices, but regulation tends to bring in enough distortion that isn't transparent so we cannot know what a proper price really is.
Being an idealist, I prefer rules which lean towards fairness, legibility, and predictability.
Air travel was glamorous because if you can’t compete on cost you compete on service.
Say... would you be interested in a bridge?
This reads like:
From first principles, you should always expect that adding lines of code increases the time it takes to execute and the burden of proof is to argue why it would not.
Just like code, economies can be made more complex, which can increase their efficiency.
I would also argue this is true? Assuming more lines of code directly translates to more CPU instructions
Yes, so the burden of proof is on the algorithm. Adding more lines of code, by default, makes the code slower. If the algorithm is more efficient, it can make the code faster. But it must be more efficient.
This logic seems to hold up to me, but maybe I’m missing something here?
I’m not arguing that a more complex algorithm can do the same stuff quicker. Of course you can do that. There’s plenty of examples of that. But in the general case, doing more things takes longer.
Of course, the CPU can execute instructions in parallel, it can pipeline instructions and gain a higher throughput, it can predict branches, etc. But those are things you have to be intentional about enabling more often than not. Making small changes in the higher level code can ruin whatever performance gains you had gained because you accidentally trashed the throughput or something.
Generally, more instructions takes longer to process. Of course, a more complex algorithm can do the stuff quicker. But it’s not the default and depending on the problem, it can be very difficult to get it to go quicker with more instructions.
This isn’t even something that should be hard to conceptualize. Getting an element out of an array using an index is O(1). Getting an element out of a hashmap is also O(1) (when there’s no collisions). Even though these both perform the same in terms of complexity (“constant” time) the array will win every time if you already know the index. Why? Because the hashmap uses more instructions to figure out where the index is.
So I really don’t understand why the assumption that: generally, more code = slower is a bad one to make. Unless you explicitly try to make the code with more instructions faster, it will usually be slower than if you did it with less instructions.
It is actually the core of the entire understanding. There is no mapping whatsoever lines of code and instructions executed. A finite program that doesn't halt will result in infinite instructions. Less pedantically a sorting function that is far more efficient will result in the instructions corresponding to individual operations being called thousands of times less.
Basically everything from function calls to loops ruins any mapping between brevity and execution time.
And just to be clear, I do agree with everything you’re saying here, but I do think you’re still being overly pedantic.
> Less pedantically a sorting function that is far more efficient will result in the instructions corresponding to individual operations being called thousands of times less.
Exactly. The goal is to spend fewer instructions to achieve the same outcome. As soon as you start thinking about how different instructions take different amounts of cycles and you can speed up an algorithm by using more instructions that are cheaper, that kind of proves my whole point. You can speed up an algorithm by using more instructions, but you have to be intentional about it. The default will never be: more instructions = faster.
Basically,
> You can speed up an algorithm by using more instructions, but you have to be intentional about it.
I feel like most code is written with some intention. It depends on whether or not you believe that most code is written competently, I guess.
The key is that code isn't running in a vacuum. It's operating on data (or controlling systems, etc). A smaller amount of code may be operating on the data in an inefficient manner, whereas a larger amount may be doing it more efficiently.
In the above talk, this contrast is very stark, because the "more code" version does some stuff and then does the exact thing the "less code" version does, yet is faster.
This kind of thing is common enough (albeit less stark than in the above example), that "less code is faster" is not a great "default" assumption to make.
Ryanair allowed me to fly across the Europe for $15 back when I was a poor student. It was either this, or not flying at all.
People are people. Your argument is strong enough without the ad hominem.
It's just like saying "embarrassing that $person is a firefighter and set their home on fire playing with matches" would not be an ad hominem.
An ad hominem would be: "embarassing that $person is a Harvard grad, making such an argument.", or "of course, we can expect such reasoning from someone writing an article for $publication"
The example you cite seems closer to attacking a person based on their arguments being (perceived or claimed to be) bad. If you say "embarrassing an XY grad would make such a stupid argument" it will only discredit the argument if I believe XY graduates are stupid (I guess the $publication example aims at this). Meanwhile, if I don't see why the argument is bad and don't have a bad opinion of XY, your statement is entirely unconvincing.
Convincingly discrediting someone’s argument and then marveling that such error or oversight would emanate from someone so credentialed is not ad-hominem. Ad-hominem is the exact reverse.
Let us at least strive to keep our error classification and biases in good order.
Regulation routinely reduces cost. It’s all to do with the nature of the regulation. Only one party is incentivised to say trot out this “regulation is bad” BS and its businesses that want to operate in an ancap utopia because they weren’t lucky enough to make regulatory capture work for them. It’s always disappointing when individuals get swept up in believing this tripe.
Can you provide an example of this actually happening in a competitive market?
> Only one party is incentivised to say trot out this “regulation is bad” BS and its businesses that want to operate in an ancap utopia because they weren’t lucky enough to make regulatory capture work for them.
Businesses that want to challenge an incumbent who succeeded in making regulatory capture work for them would be an obvious counterexample, and for the same reason the customers who want to see the challenger succeed in making the market more competitive.
Tobacco companies probably made a bunch more money as aspects of their advertising became restricted/regulated/banned - because they were basically in an arms race with one another and spending more and more to maintain market share. But that is a pretty specific case, I'm not going to make any claim that's general or applies to airlines.
https://www.nytimes.com/1989/01/02/business/the-media-busine...
No doubt you'll no-true-scotsman "competitive market", but buying a house in the UK got significantly smoother/cheaper when sellers were required to provide a certified survey to all interested parties, rather than each buyer having to commission their own survey. Lemon laws are widely recognised as making it cheaper to buy a reliable car. Food safety regulations made food a lot cheaper by rendering imported food trustworthy.
Competitive markets are what keep prices down, and you need a regulatory environment that facilitates them. The trouble is you can't even say things like "food safety regulations increase competition by rendering unknown sources trustworthy" because it depends on both details and context. You could easily have food safety regulations that impose high overhead and drive small providers out of business, or different market dynamics that provide an alternate way for customers to evaluate trustworthiness.
And each attempt is an opportunity to make a mistake and do the opposite of what you intended -- or the exact thing the incumbents wanted and lobbied for. It has to be done with care, and rarely in only cases of great need, because it's so easy to screw up. And then competition can't fix it, because regulations are enforced by a monopoly. Which is where we are now, in all too many cases.
I default to "regulation increases cost" as well, and think that the default position should be to justify it, but I don't think the opposite is a zero-instance situation.
And then because it was a chance to monopolize something it got infested with organized crime. Which is the main reason it was short-lived and never got to evolve into a functioning market. Governments found it easier to prohibit whatever was going on there than hire enough police to arrest all the firefighters.
There are fairly obvious ways to recreate something that looks pretty much like the modern system without government regulation. A city has however many fire houses that major fire insurers prepay a rate negotiated based on how many homes they insure in that service area. Since prepaying is cheaper than paying per-incident that's what substantially all the insurers do, which mutes the incentive for firefighters to hack each other to pieces to get there first.
That still isn't a lot of competition, but at least now you're negotiating for a price before the house is on fire. Which could be enough to cost less than what the government currently does.
Many regulations are needed to keep the "free" market from destroying all the good that it can do. One famous example is monopolists that are created in a free market and then use their power to make the market unfree. Only government regulations destroy these monopolies with anti-trust laws. Then there is pricing in so called free markets that are not in fact free. Such as pricing of infrastructure and services.
To name one perfect example of where government regulations lower the prices of services is in the healthcare industry. In most western countries (not the us tho) healthcare is relatively cheap and also accessible. This is because it is regulated. In the US it is barely regulated and very expensive. Without regulation the market will also destroy the environment. This is a "hidden cost" or an externality. I'm not patiënt enough to write a more coherent and better written response. But if you are at all interested in learning something or allowing yourself to be disproved, I would suggest you start by googling: "succesful regulation" or "examples of market failure".
The thing about "free market" is that it's like "reasonable person" in that it's an ideal rather than something you can actually find in the street. You want to get closer to it even if you can never actually find a flawless example.
A monopoly is basically the opposite of a free market. But where does a monopoly come from? For the most part they're a result of government regulations. The monopoly sucks and everyone hates it so you want to go into competition with them, what stops you? For the monopoly to persist there has to be some law that prohibits anyone from doing that or makes it infeasibly expensive.
The problem here is that unless you're going to go ideologically pure full anarchist, you can get to that point if the government does as little as enforcing contracts or property rights. Because then you could have contracts for selling your children into slavery or a single corporation that the government says owns all property.
So once the government gets involved with something, it has to be sure nobody is leveraging that into a private monopoly. But this is why government involvement should be minimized -- that risk increases the more they do, and there is abundant evidence that governments repeatedly fail to mitigate it effectively and prevent private monopolies from forming.
> Then there is pricing in so called free markets that are not in fact free. Such as pricing of infrastructure and services.
You're referring to natural monopolies, which is once again obviously not an example of a competitive market. The key in these cases is to narrow the natural monopoly as much as possible and prevent anything more from being tied to it than is absolutely necessary. For example, one of the classic mistakes we've made is allowing the natural monopoly on the physical last mile for data service to be leveraged into control over interconnection and over the top services like video and telephone.
> To name one perfect example of where government regulations lower the prices of services is in the healthcare industry. In most western countries (not the us tho) healthcare is relatively cheap and also accessible. This is because it is regulated. In the US it is barely regulated and very expensive.
The US healthcare industry is one of the most highly regulated industries in the world. Competition is low because FDA approval is hard to get and the AMA uses regulatory capture to limit the supply of doctors, government incentives promote employer-provided health insurance that disguises pricing from patients, "certificate of need" laws constrain competition between healthcare providers etc. etc.
The typical claim is that single payer systems have lower costs, but nearly everything has lower costs -- the US has some of the most expensive healthcare in the world -- because it has some of the most onerous healthcare regulations. Meanwhile countries like Singapore have lower costs and good outcomes with a predominantly private healthcare system, because it is less inefficiently regulated.
> Without regulation the market will also destroy the environment.
This is clearly not an example of regulation lowering consumer prices. The claim was never that regulation can never be necessary. You don't want the widget factory dumping industrial waste in the river, but prohibiting that isn't generally a means to lower widget prices.
It can even do both things at the same time. You can have a regulation that succeeds in reducing pollution while also being dramatically less efficient than some other means of achieving the same goal. This is why government regulation is so precarious: If you get it wrong nobody else can fix it because anybody who tries to do it another way is incarcerated.
The latter is better to such a degree that the former is just a toy example with no practical use outside of academic discussions and corrupt politicians who want to avoid solving the underlying problem on purpose.
This leads to shortages.
I am speaking from experience here. I'm an anesthesiologist, and with three exceptions I can think of, our drugs are all off-patent, so their prices are basically a function of production costs. But the federal government of the US, which buys a lot of drugs under the VA and Medicare, has a rule that you can't increase the price by more than X% per quarter (or year, not sure). Now, we all agree that this sounds like a good regulation. Right? Nobody can just raise the price of insulin by 40000%?
Except that generic drugs really don't make much money, and when one company leaves the market for a given drug (there are usually only 2-3 manufacturers per drug), the remaining corp(s) can only make up the shortfall by moving to 24-hour operations (in the short term). Staffing that means hiring more people and paying overtime. So the cost of production... doubles, at least.
The part that is missing: it's a drug that sells for twenty cents for a sterile ampule. Doubling it to forty cents is not going to break the bank. It's cheap, it will continue to be cheap, and yes - in the long run, someone will set up a line to make it for ten cents and sell it at twenty. But in the short run? You run out of drugs. I've seen it in almost every category of anesthesia drugs (induction, opioids, paralytics, paralytic reversal, etc.) in the last ~20 years. You'd think that "not being aware during surgery" would be one of those things that people would care about, but it isn't.
Or lower margins. After you spent millions/billions on R&D, testing and approval, why would you purposefully decrease your product just because your margin now is not 2500% but 1000%?
Of course this might affect your willingness to invest into developing new drugs in the future
But if you have an uncompetitive market on purpose as a result of patents meant to increase margins to fund R&D, a law capping prices is a screw up because it was meant to be the way it was.
Whereas if you have an uncompetitive market unintentionally as a result of some other regulatory failure, a law capping prices is a screw up because you're not actually lowering margins from 2500% to 1000%, you're just raising them from the ~5% they ought to be to 1000% instead of 2500%, which is still bad.
How about EU regulations on the price of mobile phone roaming between member nations (the "roam like home" rule)?
This isn't the same thing as whether you like the result of the rule. Maybe paying a little bit more in total in exchange for having a more predictable monthly bill is something people like. It would still be paying a little bit more, if the market there is competitive.
Economic theory usually assumes pute and perfect competition, which doesn’t exist in many markets
It's easy for regulations to lower costs in an uncompetitive market because the lack of competitive pressure allows the incumbents to do all kinds of inefficient nonsense that would drive them out of business if it was actually practical for new competitors who don't do that to enter the market and undercut them on price. But what you want to do in those cases to the fullest extent possible is to restore competition to the market, not try to regulate the incumbents while keeping them as a monopoly/oligopoly. A set of regulations that gets you 8% of the benefit of actual competition can be a significant improvement from the status quo while still being by far the less effective solution.
The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers.
The EU capped the wholesale rates and mandated that there be no retail cost, so now carriers are charging less to each other and consumers are roaming on their own numbers without worry, and without the hassle, expense, and waste of buying SIM cards all the time.
It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value.
So it was already available at a low price via a different route.
> The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers.
You're describing an uncompetitive market. The local carriers have such high market share that charging otherwise-profitable wholesale rates would deprive them of a monopoly rent so they're not willing to do it.
Compare this with a market where there are carriers with low market share who don't care about cannibalizing someone else's retail sales to get more wholesale customers.
> It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value.
The drawback of this approach isn't that it can't produce an improvement relative to a preexisting uncompetitive market, it's that it leaves the uncompetitive market in place. Which is almost certainly itself a result of existing regulations.
Suppose the way mobile networks operated is that anyone can build an independent cell tower and then auction off capacity in real time. Which makes it easy to operate a cell tower; you just build one and sell into the market. So you end up with dozens of local cell tower operators or more and any carrier, local or otherwise, with a customer in the area can bid for capacity from any of them. Which also means that anyone can start a carrier, because "carrier" just means you resell wholesale capacity from all these independent cell towers and your business is to bill the customer and provide customer service.
Doing it that way is going to solve your roaming problem and seven hundred other problems and lower prices. But existing regulations don't facilitate this, do they?
It makes about as much sense as having multiple competing rail networks or power lines, the more tower there are the higher overall cost per user.
That's the amount you'd expect them to charge -- the cost of building a tower. That is what they have to recover.
If they try to charge much more than that then it's profitable for someone else to build one.
> It makes about as much sense as having multiple competing rail networks or power lines, the more tower there are the higher overall cost per user.
If you have more towers you can reduce the transmission power of each one and it increases the available bandwidth by reducing signal overlap. If the towers themselves used realtime spectrum auctions then the tower nearest the user could come in with the lowest price because it could use lower transmission power and less spectrum.
You can also very reasonably have competing rail networks or power transmission lines because they don't have to use 100% all the same routes to ultimately still connect all of the same cities. Then some may be more efficient for certain routes but the alternative still puts an upper limit on what they can charge, and provides for redundancy in case one of the lines or networks is unavailable.
Yes. Now they can’t do that so prices are lower.
The regulations didn’t really make the markets more competitive though. They just capped prices.
Which is why the regulations are still causing prices to be higher than they ought to be.
What? No they don't. Not without considerable adverse effects at least. You're not referring to price ceilings, are you?
This is just plain wrong. Outside of monopolies (very few cases) regulations increase cost.
Now, there are things more important than cost but that is a different argument
Similar to what you said I find it’s disappointing when individuals get caught up in believing that regulation or “more government” must be good while they ignore the externalities that the government brings to bear - I’m still trying to figure out why the government is regulating my EV like it’s a super duty F-250, and why the government made it illegal in my state to bring my own bottle of wine to a restaurant.
I’m also trying to figure out why the government is leasing my land in Alaska (I’m an American, therefore it’s mine as well - yes I’m aware of recent Biden admin actions +) for oil and gas companies but won’t approve new nuclear reactors.
It’s also crazy to me that the government doesn’t regulate by making mandatory seatbelts a requirement for school busses, and why it fails to regulate (ban) additive sugars and vaping and all sorts of other harmful products.
I’m not trying to both-sides it here, but the central theme is everyone has an opinion on this stuff and the truth is regulation is good and bad, and it can cost or save money. We shouldn’t get into X is good, Y is bad. It lacks nuance.
In terms of regulation reducing costs, you only need to look at Europe.
Regulations in education, housing, medication, cellular networks, utilities, etc. have all driven cost down to one degree or another depending on which specific regulation a country has implemented.
“Ah”, says the American, “but now show me regulation in a competitive market” as they rub their lower back in an effort to quell their aches from carrier that goalpost.
And then you point out that those examples are of a competitive market.
Only for them to pull a “gotcha”, because surely it couldn’t be that competitive if it had a cost reducing effect.
The further you entertain, the more they move the goalposts and introduce circular reasoning, because in their mind anything that challenges their worldview must simply not be true.
If you’re coasting to earth in a parachute and someone gives you a cup of coffee to drink which does nothing to change your rate of descent, would you then attribute your descent to the cup of coffee?
You even say it yourself: There’s lots of reasons… but deregulation wasn’t necessarily it especially not in the axiomatic way you say when you say that by “first principles”, regulations increase prices.
E.g., regulations and legislation around marijuana access have decreased prices, the ultimate “price” being a stint in jail for possession.
Also, regulation around marijuana has not decreased prices. This is obvious because in places where marijuana is now decriminalized people still prefer to buy from illegal sellers... because it is cheaper.
Do you have a source for this? I've seen graphs for prices since ~1980, but my search-fu fails to find anything before that.
No, this on its own doesn’t prove anything.
Right back 'atcha: What mysterious event caused the null-hypothesis to become "technology never improves therefore prices are constant forever"?
Not just in avionics, engines, etc. but also all sorts of operations that are now automated.
My recent experience with international flights indicates that business class is 5x of the premium economy seats, which are 1.5x already
If you were to buy the cheapest (non-flexible) business class fare many months in advance, you might well get it for significantly less than a flexible economy fare sold one week before departure.
Also note that airlines price on origin and destination, indirect (connecting) flights typically cost less than direct, so if you want to fly from London to New York, in business class, it's almost certainly going to be cheaper to fly somewhere else and to start your journey (and fare) from there, and fly _via London_ to NYC. Specifically you'd fly first to Dublin (or Oslo, or Budapest, or ...), then turn around and fly DUB/OSL/BUD-LON-NYC-LON-DUB/OSL/BUD.
Airline pricing can be very, very counter-intuitive to the uninitiated.
(Source: have paid for 20+ business class flights in the last 12 months, none of which were what I'd call expensive, as I despite being a miles collector I am fairly price sensitive. Just as happy to fly with Ryanair or Easyjet when value for money is to be found there)
> However, traders may still set different net sale prices in different points of sale, such as shops and websites, or may target specific offers only to a specific territory within a Member State. Under EU rules, all these offers must be accessible for consumers from other EU countries.
They are not allowed to redirect you without your consent, and you must also be able to change location at any time.
>Where a trader has several country versions of the same website, such as a webshop selling products to different countries across the EU, you should be able to choose to view which version you visit. You must give your permission to be redirected to a specific country version of the website. You should also be able to change your choice at any time.
https://europa.eu/youreurope/citizens/consumers/unfair-treat...
> However, there is no possible justification for differences in access to goods or services for customers from different EU countries in the following three situations:
> sale of goods without physical delivery – for example, if you buy something online that you will collect from a shop, rather than have it delivered to your home
> sale of electronically supplied services (excluding copyright protected content) – such as cloud computing services, or website hosting
> sale of services provided in a specific location – for example hotel bookings, car hire, tickets for entry to theme parks
I haven't yet figured out what the exact logic is behind this and when it applies; it's just been my personal experience.
I think the biggest problem with the terminology is that domestic (US) First is often hardly comparable to international Business Class, but more like European regional Business, which is more often than not just the lack of a middle seat.
The large US airlines even have different terms for their international Business offerings: United Polaris, American Flagship, and Delta One.
I will grant you heavy regulation of the 1970s was a price inefficiency. But I'd need some representation of cartel market/regulatory capture price inefficiency of the current situation to compare. I suspect it isn't that much.
Fuel costs are probably higher, but engine and plane design efficiencies should have overcome that. IT should be a huge amount of efficiency in operations, at least 20% of the former cost. Then we look at how worse service is now and how much more cramming / leg room reduction, fees, etc. I'd have to know if you "ticket costs half in real dollars" figure includes basic "user fees" or not.
Here's Robert Reich on airline travel:
https://www.youtube.com/watch?v=eTzaMXXelew
Yes, the liberals favority economist. But I agree with his fundamental arguments about modern air travel and the oligarchical / cartel nature of virtually all of our markets for goods and services.
I doubt anyone who has worked as a programmer in the industry, myself included, would say that IT is hugely more efficient. The majority of the commercial passenger airline industry still revolves around Sabre: created in 1960 by American Airlines and still, to this day, unable to handle text with diacritics or non-roman alphabets. Everything is wrappers and layers around Sabre, and Sabre charges for every transaction.
In an efficient market, Sabre would have disappeared after deregulation. Instead, more and more airlines signed on.
Isn't each individual airline is itself a command economy, internally? Many large companies manage their assets centrally, for example Kroger or any other large grocery chain manages itself via central planning. Would they function more profitably if individual store managers were bidding to "purchase" groceries from the central supplier? The only datapoint I know of is Sears, which tried something similar and went down in flames
Yes. The difference is that an "airline command economy" collapsing from incompetence is an uneventful bankruptcy, and a national command economy collapsing means civil war and anarchy.
Although sometimes I imaged UBI to instead enhance free market because it allows every person to contribute to the competition and can still fail gracefully. Instead poor person is now also "too big to fall" because they're betting their livelihood for each proposal.
The difference is that airlines, no matter how large they are, have to deal with the reality via market forces. So there's a feedback mechanism that will eventually point out if your commands are correct.
Command economies (or sectors of economies) don't have such a mechanism, so they can stay inefficient forever.
I would argue that the energy sector of most developed nations as a counterexample. I think we can go back and forth all day about the extent to which they are true command economies, but the ultimate point that natural monopolies can and often are successfully managed by nations in a centrally-planned manner I think is clear.
Europe and the US are most definitely not counter-examples. Power generation is almost everywhere done commercially. Transmission is more often publicly owned, but even that is not universal.
The closest example to the command economy is rail in Europe. And it's predictably struggling.
Private corporate ownership and central planning are not mutually exclusive. Texas is maybe the only place in the US where energy production isn't centrally planned, for any reasonably local definition of "central."
Correct. For example, the government is not saying that Duke must put ten gas power plants in a particular location for $10 by 2025.
> That each section of its business is in some sort of free market?
Funnily enough, this is pretty close to how Duke operates. The central holding company only deals with the strategic planning, and its subsidiaries make their own plans to implement these plans.
But anyway, even in the areas where Duke has a legal monopoly, it has to contend with other utilities, otherwise its monopoly will end.
> Private corporate ownership and central planning are not mutually exclusive.
They are. Central planning from the government means that there's no meaning in private ownership. Centrally planned industries are not affected by the market forces, so they can become inefficient without the market feedback.
Central goal setting is fine, but not planning.
If you require central planning to retain an element of planning by the government in your definition, then I agree, energy is not a good example of this.
Perhaps, but in competition with others. Governments compete too, but the cost of switching brands is inordinately high, so the competition there is too weak to generate better results among the various governments.
Most of the "natural monopolies" we have were created directly as such by governments.
Electric utilities? There used to be competition. Idk what happened exactly, but then we had no competition and they were regulated.
Public transportation? New York's subways (90% of existing track!) were built by two competing companies, then NYC regulated them into bankruptcy, and then NYC acquired them. Similarly with busses and trolleys. There used to be a vibrant trolley system in New York, then the city killed it and "nationalized" it. Compare to Buenos Aires, where they never nationalized the bus system, and which has a privately operated bus system that is the envy of every American city!
Cable systems also had competition, but then all the towns regulated them.
If Edison and Westinghouse could compete a century ago, they could compete today.
Roads are pretty much the main case where I'd agree there's a natural monopoly, and then only because there's not enough physical surface space for competition.
In any case, airlines are far far from natural monopolies. Airports might be, but not airlines.
The power grid is another classic example of a natural monopoly, it costs a lot to make a power plant and hang a bunch of wires, but once it's running it's basically free to send a small unit of additional power to a person. For this reason the US was going to nationalize the grid back in the 20s but at the last minute decided to lease to a "regulated monopoly" private corp (IIRC it was some dude in Chicago who convinced them to give him the lease). Texas tried to roll this back in the like the 90s and their power costs shot through the roof and still remain nationally high.
I'm curious why folks think the failure of command economies in the pre-digital era carries any weight today. We have orders of magnitude more data today, and I feel like it should (theoretically) be possible to use that data to optimize for things other than maximal profit.
If you say "I can take two checked bags, it's included in the fare", I'll probably only take one because I only need one for the duration of my trip. But I'll feel good knowing if I decide I see something awesome while on my vacation, I can take it home without too much care for penalty fees.
But if you say "Each checked bag is $50", people will pack everything up to and including an entire 1996 Toyota Corolla into their free carry-ons, exhaust the available space, and the airline has to say to the economy class late-boarding group 'everyone after this line has to check their bag anyway, but we won't charge you the $50."
As an added plus, the price awareness reduces the quality of the travel experience-- you end up asking "can I fit another souvenir in my little free bag", and often deciding against it, because it's insanity to spend $50 in bag fees for a $10 book.
Either the market has an endless appetite for banking or capitalism does not in the end deliver what markets want.
I don’t like it but I think it’s clear this is the case. The demand for “buy now, pay later” seems to be huge, even if it costs more in the end, even for seemingly trivial amounts of money for regular purchases. But I really have no idea how much things like affirm on Amazon actually get used, maybe no one else is using it either.
It may be cute to say “X is a bank”, but an airline is not a bank. Besides the obvious facts that you cannot withdraw money from an account or pay your bills, if they didn’t fly planes the points would be ~worthless.
The fact that they don’t profit from those activities is a market economy working as intended*. Cars and flights are easily substitutable goods, you’d expect to see the profit competed down to ~nothing.
*Arguably there is getting to be too much consolidation in the airline industry, and also legal limits on airport gates act as a huge barrier of entry for new competition.
(edited for clarity)
To do the "actually send passengers from LAX to ORD" part of running an airline you have to pay for pilots, gate agents, planes, the world's smallest cups of flat ginger ale...
But shuffling around frequent flyer miles as a psuedo-currency? No actual tangible expenses there, just some obligations that end up on some future quarter's balance sheet.
The top 10% holds 69%.
https://www.stlouisfed.org/institute-for-economic-equity/the...
A young doctor with $100k in med school loan debt is part of that “bottom 50%” of wealth but nonetheless an extremely attractive target for “the market”.
In a healthy competitive market, they're also reactive to customer desires, but when they're presented with the opportunity to decrease competition through consolidation or other means, it's blatantly obvious where their true loyalties lie.
This is easily and provably false. A single-digit percentage of households holds over well over half the wealth.
Not sure how that breaks down.
If you want to make money from the middle class, you have to do better at something than whoever is doing it now.
If you want to make money from the rich, you just have to dream up some new twist on their wants (sure, it has to be executed reasonably well, but you're not competing in the same way).
So sure, most of the money that changes hands does so via the daily/weekly/monthly spending of regular people. But that's not where the big money is unless you come up with a truly mass market new thing. The big money is in providing for the wants of the rich, because the marginal utility of what they spend on wants is so low to them.
Markets care about "aggregate demand". Rich people can be lucrative individual customers because they have more to spend and often less price sensitivity. But they have limited capacity for consumption in many areas; they only eat three meals a day and only fill so many airline seats at once. The middle class and even lower classes have much higher capacity for consumption and are worth targeting - think McDonald's or even Google (advertisers want all the eyeballs they can get, even if they prefer wealthy ones)
There's a great deal of inefficiency in our current system as well, though.
I suppose I'm talking more about the "how much grain should we grow this year" sorts of questions that the Soviet Union failed at. It's almost certainly impossible with early 20th century tech, but with modern computing it seems like it might be more efficient to solve by one party with great resources, rather than by many parties with more primitive predictive tools.
When it comes to the discussion at hand, transportation infrastructure is one of the few areas that's inarguably more efficient when centrally conducted, which is why our roads and subways are government-operated, and why the airlines have an insatiable desire to consolidate.
I'm not sure what technology we have now that the Soviets didn't have that would allow for successful central planning of agriculture. Local boots-on-the-ground conditions vary so much, even from one end of the field to another.
That aside, even if we had technology sufficiently advanced so as to be indistinguishable from magic, there's the other great problem that central planning couldn't overcome, which is the problem of human nature and incentives. Many parties with primitive tools who have a direct incentive that their crop is bountiful will beat out the one central party with great resources that nevertheless lacks skin in the game.
Excellent point.
The incentives to innovate in ways that actually benefit people are weak in our system, because the disincentives to innovate in ways that just make you a bit wealthier are small to non-existent.
A modern digital command economy wouldn't have price signals, but even if it did it wouldn't make decisions like the individuals would precisely because the point of a command economy is to deny individuals freedom. And that is a reason that digital command economies wouldn't have price signals: there's little point when the point of the command economy is to ignore those price signals.
This is an unsupported generalization. Command systems exist to mandate production and distribution of goods, e.g. to ensure sufficient food production and equitable food distribution. They eliminate the "overhead" of competition and the need for marketing. Look at any self-sufficient commune and tell me their internal economy has anything to do with imposing limits on freedom. Don't let your negative feelings toward certain historical examples cloud your understanding of the matter at hand.
Furthermore, nobody said anything about working hard.
Surely you're not about to claim that all pre-colonial civilizations with functional governments either somehow had free market incentives or collapsed into famine.
"There have never been X" is always an extraordinary claim and you've done a poor job making it.
> This is an unsupported generalization. Command systems exist to mandate production and distribution of goods [...]
This is exactly denying individuals freedom. It's right there in the word "mandate". If you want to produce some thing or service at some price, you don't get to unless that's what the planners want. If you don't want to produce some thing or service at some price, you may be forced to by the planners. You don't have freedom of agency, and you can't have freedom of agency, in a planned economy.
> I have command of the X-economy and can mandate the production and distribution of these goods
> The intended point of all this is somehow to deny individuals their freedom to fail to create an X factory, rather than to ensure that X gets created and distributed at all
What if there is no profit? What if I operate at 100% loss, year after year, propped up by the subsidy of a fiat currency, to provide something everyone needs, and don't think the goods and services which sustain life should come at any cost? I am overwhelmingly popular. Nobody is going to seriously compete with me, although they're free to try. Nobody is forced to work for me. Whose freedom have I limited? Doesn't this sound like a lot of things we take for granted every day which are centrally planned?
But I hope you sleep well! It's crucial for proper brain function.
There it is. "Unsupported generalization", followed by your own generalization that amounts to the same. I did point it out above.
In any case, your statement still fails to hold water. Consider the ISS: there is central planning and command of the entire economy of the vessel, from its air, water, and food to its electricity and the time of the astronauts themselves. But the 'point' of this command economy is not to limit freedom; it is to keep the astronauts alive. This is the most extreme example, but obviously there are other situations (ships at sea, camping trips with a group, military operations) where centralized control of the goods produced and services performed serve the goods of the group's goals, and have nothing to do with intentional limits on freedom.
It's not just claiming I made an unsupported generalization and then making one, it's the the one you made was the same as the one you claimed I was making! Strictly speaking it's not a contradiction, I suppose, but if you did it unthinkingly then I think calling it a contradiction is fair. Though if you want to call yourself a hypocrite, don't let me stop you!
(EDIT: Ah, you weren't contradicting yourself. You were agreeing with my "unsupported generalization"! Heh.)
As for the ISS, it's not exactly comparable to the subject in this thread (airlines) in scale. The ISS is the only destination for the "airlines" that service it, and there's only two of those "airlines", and they both fly very rarely, and the passengers are 99% not tourists. Nor is there much of a business in sending tourists to space at this time. But if ever there is such a business, it will be because companies like SpaceX and Blue Origin make it so, not because the government "regulated" space travel before "like airlines". The comparison is not apt is just not apt.
As to central planning reducing freedom, that is most certainly true, though if a government imposes central planning only for a very small part of the economy, then the reduction in freedom is not very great and maybe barely noticeable. At the limit central planning definitely eliminates a lot of individual freedom. We've seen this many times with Soviet communism, Cuban communism, Eastern European communism, Chinese communism, East Asian communism, etc. They don't just eliminate much individual freedom -- they kill a lot of people on purpose, and then even more via famines caused by their vaunted central planning.
You said, "the point of a command economy is to reduce individuals freedom." I have provided numerous arguments that a command economy could serve another purpose -- survival in extremis, provision of public goods at a loss, and creation of a communal sense of obligation.
I made no argument about the specific context of this thread. I made no argument that it does not decrease individual freedom. It does, as does any situation where the principal decision maker and executive agent are not the same person. But that is not always the purpose. Your inability to understand your own words and their implications astounds me.
> command economies have occasionally produced innovations by throwing enormous resources at particular problems, but for the most part they are stuck with copying innovations from free market economies.
Hmm. This seems unfair to the military during wartime? WW1 feels like a huge example.of advancement driven from very command-ey institutions; from the idea of the tank to deal with machine guns and barbed wire to nitrogen-ating fertilizer in Germany to withstand the British blockade. (Never mind DARPA and the internet or the moon missions during the Cold War, or the Manhattan Project)
(Yeesh, not that I'm suggesting it would be preferable to pursue this as a full-time model - it's literally fascism, but it's important to understand why these systems were pursued in the first place - the point is that there do at least appear to be high profile success stories)
The whole point of regulation was to keep prices up so the airlines wouldn't implode like rail did. It was not meant to keep prices down.
So when we got rid of airline regulation, prices went down. Some airlines did implode, but not as badly as rail did.
Thankfully for airlines, it seems flying is a lot more indispensable than riding by rail.
Rail in the US died because US cities are far enough apart that flying made a noticeable difference in travel times, unlike more compact countries. There's a reason Amtrak only works well in the relatively dense northeastern seaboard of the US.
That said, the airline industry is one where competition seems to be working pretty well. It's a market success story. The most efficient market is one where everybody is making close to 0 profit, and that's a good description of the airline industry in the past few decades, especially when you focus on the relatively small part of the airline industry that deals with flying planes and their passengers.
More like air routes are a lot cheaper to change than rails. Nor do air routes cost millions of dollars per-mile to build.
And yes, jetliners are several times faster than trains, even bullet trains, and since rail networks are orders of magnitude more expensive than airline networks... The whole thing adds up to air travel being much much much cheaper and more convenient than rail with relatively few exceptions involving high population densities.
I think a big aspect of this is that railway workers were much more unionized than airline ones. So what better way to kill the unions than to kill the industry.
I would say that it demonstrates that, where competition exists, deregulation can achieve some pretty good results. It's worth noting that consumers can choose which airline to fly every time they fly and the cost of switching is non-existent (absent loyalty programs which is why they're called loyalty programs).
It's also worth noting that since airlines are pretty critical infrastructure, when there's an economic downturn and the government bails them out, the government is essentially subsidising the discounts of the previous 10 years and generally doesn't do it for the very small airlines that aren't too big to fail so it's also still a bit government-ish.
It wasn't fully deregulated and left alone, some aspects were deregulated. As usual people like to bucket government policy as black and white but in reality it's usually somewhere in the middle.
[1] https://www.transportation.gov/policy/aviation-policy/small-...
It’s a miracle that airlines are as functional as they are. People REALLY like flying.
I've certainly had a few airline experience that ended in my wishing I had just driven from A to B because delays and the general inconvenience of it all meant that it would have been faster AND cheaper to drive, but of course we didn't know that when we booked the flight.
It's more that the government subsidizes their lack of resiliency in a back-handed way. This might not be so bad because markets are usually short-sighted and fail at this, so the only way for it to exist in a market system is for the government to pay for it. This is what the Farm Bill does. It subsidizes food production because people starve when markets are too efficient.
A lot worse. So bad that while I love to fly, I hate to fly on commercial airlines and avoid it when at all possible. Especially post-9/11.
Some of the issues are mitigated by flying first class, but even that only makes it a bit more tolerable, but not enough to be worth the increased airfare.
It's REALLY hard to compare anything 1973 vs 2023 as there are way more factors in play than just "oh it was X then and is Y now"
Can anybody think of an industry where government ownership leads to more efficiency and lower prices (including the amount the government pays)?
One argument I've heard in favor of government-owned industry is for things that must be more or less guaranteed for everybody, regardless of capital.
Drinking water, postal service, election management, and violence (police, national guard, military) come to mind.
Those examples might be more efficient and affordable if privatized, but then it might be expensive or unreliable to get mail in Alaska, or there might be lawlessness near parts of the Mexican border, or elections might be fraudulent in some districts.
Throwing tax dollars, laws, and bureaucracy at these things doesn't necessarily improve them, but maybe it raises the bottom, at considerable cost.
Huh?
airline deregulation != command economies
airline deregulation == free market
This statement sounds like it should read: "airline deregulation shows just how bad laissez-faire economies are at planning and allocating resources"
The problem isn't deregulation, it's preserving competition.
An apples to apples comparison with equivalent legroom etc a domestic flight in 1970 was often cheaper than what people see today. The cheapest thickets on long haul flights have fallen significantly, but that’s also where technology has made the greatest strides with more efficient engines requiring less fuel and thus less weight which increases efficiency which then compounds on longer trips.
And this improved technology was an inevitable, foregone conclusion?
People make arguments like this as if it was some passive thing, as opposed to thousands if not millions of conscious decisions to improve turbines, airframes, and myriad other technologies, then actually implement them in real aircraft, then acquire and deploy a commercial fleet.
People made these decisions because they were incentivized to trade time and money today for material improvements tomorrow. Why do you think that might have been?
Hint: think about industries where there isn't much competition. Do we see similar improvements there, usually?
> think about industries where there isn't much competition. Do we see similar improvements there, usually?
I can't think of an industry without competition where said industry doesn't try to improve their product or production for more profit. Maybe something in the medical space that I'm unaware of, but this definitely doesn't fly for aviation or transportation in general.
Precisely because those fields are in a high economic (and consequently technology) competition, you see innovation as you noted. The parent comment is that you cannot throw away the competition and still expect innovations to happen.
Had deregulation not happened for airlines in the 70's, why would we expect that they wouldn't innovate to produce less expensive and more reliable aircraft? Any sort of improvements there makes a bigger profit and avoids killing customers (also pretty good for profit).
Seoul and Tokyo have the most extensive subway systems in the world. Both have both privately owned and de facto government-owned lines through government business entity. The innovation here is connecting key areas in the city. The new lines that connect new city centers that emerged are privately owned; they care about profit and they are incentivized to provide popular, convenient services by connecting new city centers. Also, there are other innovations like self-driving trains in those private lines (see Shinbundang Line, the newest in Seoul). A government line with legally guaranteed profit is less poised to innovate although some innovations happen due to popular demands or government initiatives.
It's not that government-led projects have zero innovations, but they tend to have less momentum than well-motivated well-aligned private corporations. Well-aligned (with the public's interest) is the key here.
I don't know if particular examples prove anything, but you asked for examples, and here it is. We do have decades of economic research that competition generally leads to innovation in services and technology.
As to improvements without competition, it’s surprisingly common. AT&T was a huge hotbed of technical innovation when they were a monopoly from ever improving switches and fiber optics etc but they even produced one of the first commercial Unix System V. They also played a surprisingly large role in early satellites literally owning the first commercial communications satellite used for the first live transatlantic television signal. https://en.wikipedia.org/wiki/Telstar
Monopolies often spend huge sums on R&D outside of their core business. Google’s self driving car is exactly the kind of investment you see when companies have more money than they know what to do with. Xerox for example developed the desktop UI mouse included when they held a huge monopoly, not that it helped them but it did push the industry forward quite a bit.
Your primary care physician is in a competitive market yet presumably still makes appointments over the phone rather than allowing people to schedule online. Such technology has existed for decades and some doctors let you, but adoption is still slow.
AT&T was hardly the only phone company in that time period, people just didn’t really care. Phones just cost a lot and spending more to have buttons just wasn’t considered worth it.
Even into 1982 most people were still renting their phones from the phone company: “Some resistance to buying phones might be evident in the response to the sale offers made in New York, California and Oregon. In New York, those who now rent a plain rotary dial phone pay $3.03 a month and have the option of buying it for $35, which means that the phone would pay for itself in reduced bills in one year. The return on some other models is even faster.
Yet New York Telephone has sold only 400,000 to 500,000 of the 5.5 million phones it has placed in homes, according to Paul D. Covill, New York Telephone's vice president of marketing.” https://www.nytimes.com/1982/12/16/business/new-era-for-the-...
Only 78% of US households even had a phone in 1960, jumping to 90% in 1970, and that was unusually high compared to the rest of the world.
Exactly! You had to. 1982 is a very relevant year, the last year before AT&T was broken up. People did want to own their phones, and they wanted choice, and they wanted fun weird phones, or cheap phones, or whatever. Monopoly quashed that.
From 1960 -> 1980 phones barely changed. Compare that to the changes from
It seems strange today that people would rent phones, but they used to be very expensive items even outside the US. The practice ended because prices fell so far not because people’s preferences changed.
As if prices aren't a part of preference? As if innovation isn't lowering costs? That alone torpedoes your claim - why wasn't AT&T innovating on lowering prices? Obviously because they were a monopoly and how no incentive.
What you you may not know, is that people didn't switch from renting to buying the same boring phones, the market exploded with phone options. Where was the AT&T cordless phone pre-1982?
You didn’t even bother to argue against the points raised by the article itself, which goes as far as to say that the benefits you attribute to deregulation hasn’t occurred beyond the first few years after deregulation.
> Deregulation even failed to deliver the one thing it is sometimes credited with: lowering prices. Airfare did get cheaper in the years after the 1978 deregulation law. But the cost of flying had already been falling before deregulation, and it kept falling after at about the same rate.
Writing this demonstrates you don't know what you're talking about. Plenty of people would happily pay double for a first-class seat but that's not nearly enough. At best paying double gets you into premium economy.
Most domestic (USA) first class tickets are 3-5x the cost of an economy ticket. For international flights, business tends to be 3x and first class is something like 7x-10x.
This is probably how frequent-flier programs should have been run in the first place. Airline don't care that you fly alot, they care that you are a profitable customer.
That means business customers and the wealthy will still be their main clients. This just means they lose the churners and the price sensitive bargain hunters, which almost every airline would be happy to trade away for more business customers.
It's a win for the airline as they keep their core customers happy as their rewards won't change and they'll lose the unprofitable customers who used their rewards programs alot without spending much.
> A 2020 analysis by the Financial Times found that Wall Street lenders valued the major airlines’ mileage programs more highly than the airlines themselves. United’s MileagePlus program, for example, was valued at $22 billion, while the company’s market cap at the time was only $10.6 billion.
This looks alot like car companies whose leasing arms became more profitable than their manufacturing arms for part of the 2000s.
But wallstreet loves companies that they can easily value and this "conglomerate" style business has been out of favour for a while now.
Sooner or later some airlines will spin out their rewards business into a separate company to get the maximum valuation from it. Just like how deregulation lead to the consolidation of airlines, I wouldn't be surprised to see only a couple of rewards programs that every airline uses in a decade.
As usual PE will be the winner. I'd bet Blackstone or Apollo will roll up multiple programs into one or two uber rewards/credit card programs that are spun out into public companies. VISA and Mastercard won't care who owns them. As long as it drives more credit card usage, they'll be on board.
Explain. I see a handful of identical mega corps with a government protected monopoly (regulations + access to airports). Hasn't regulation increased consolidation to share the cost of compliance?
Like the pork barrel shops in the airport, why is this a private business at all?
https://airandspace.si.edu/stories/editorial/airline-deregul...
Big companies have just figured out that scale and vertical integration kills everyone smaller.
I see the opposite: new, brightly-colored airlines seem to pop up every year, each offering substantially the same thing: sub-$100 direct tickets to Florida (and probably other) destinations from low- and mid-tier airports. And they're all catering to the people who these rewards programs are shedding.
Every successful company eventually becomes a bank. See also Apple.
The more successful, the larger the pile of money and more likely to look bankish.
Due to technology, the old use case of banks is mostly obviated. There is no technical reason everyone should not just have an electronic money account at the Fed itself for receiving and sending money. And earn the federal funds rate directly rather than have it go through a middleman who is basically just operating a database.
And lending does not have much to do with receiving people’s cash deposits.
Yet you complete leave out the non-technical reason why that's a terrible idea.
Systemic Single-Point of Failure, extreme vulnerability political exploitation, no robustness or process/partition based discorrelation to stave off or slow down financial contagion.
Robustness is entropic. It uses more energy, but gains in it's ability to remain up in the face of a myriad of quantifiable stimuli instead of falling apart at the slightest touch.
All eggs in one basket is a bad idea. No one makes a good enough basket.
I think you're grossly overestimating the fallout from this. I am the aforementioned business customer. Literally the only way you'd ever hit the dollar amounts they're looking for is flying multiple times across the Atlantic paying full fare business class - which I don't do. But I do fly multiple times a month across the continental US. Previously I would book Delta regardless of price for both business and personal travel due to status. They've made it basically unobtainable unless you're paying full fare first class on every flight AND booking your cars and hotel through them.
Going forward I'll just book the cheapest flight available and drop their card. They will be losing at minimum 10s of thousands a year in profit from my travel and card spend alone.
Even assuming 1%, for an airline to lose $10,000 in profit, you would have to be spending $10,000 / 0.01 = $1M per year on that credit card.
And if you are spending a minimum of $1M on your credit card per year, I doubt you are spending your time optimizing “miles” and “points”.
I assume there are lots of smart people working at airlines that can work out which of their policies earn and lose money, especially now that all the competition is minimal except on the most popular routes.
> especially now that all the competition is minimal except on the most popular routes.
I guess airlines are betting sufficient passengers have no better option, and I would bet that too. I cannot remember the last time I got to pick an airline without heavily inconveniencing myself and wasting tons of hours with extra stops. Even a busy airport like Newark, you are basically flying United for 90% of destinations if you want to get there in the shortest amount of time with the fewest stops.
An airline like Delta will adjust but there will be pain for them in the short term and pain for customers in the medium and long term with fewer, more expensive flights. All of this assumes these changes actually lead to customers changing their behavior rather than simply saying they will.
https://www.macrotrends.net/stocks/charts/DAL/delta-air-line...
https://www.macrotrends.net/stocks/charts/UAL/united-airline...
https://www.macrotrends.net/stocks/charts/AAL/american-airli...
https://www.macrotrends.net/stocks/charts/ALK/alaska-air/pro...
https://www.macrotrends.net/stocks/charts/LUV/southwest-airl...
https://www.macrotrends.net/stocks/charts/HA/hawaiian-holdin...
https://www.macrotrends.net/stocks/charts/JBLU/jetblue-airwa...
https://www.google.com/finance/quote/DAL:NYSE
And again, that doesn't address the fact their net profit margin has literally 0 relation to their profit margin on MY TICKET which is CONSIDERABLY higher than 11.72% on average.
https://s2.q4cdn.com/181345880/files/doc_financials/2022/q4/...
And page 63/64, it seems like Macrotrends is using “net income/loss” row and the “total operating income” row, and Google is also using the same, so not sure why the quarterly figures are different. Macrotrends does look erroneous here.
>And again, that doesn't address the fact their net profit margin has literally 0 relation to their profit margin on MY TICKET which is CONSIDERABLY higher than 11.72% on average.
Yes, the delta bosses are not considering the profit margin from your specific flights, but assuming the vast majority of their business is flights where their airline miles come into play, then I figured it is a good assumption that, on average, losing a flight costs them the around the same profit margin.
Of course it is possible they lose so many flights that it cuts into their fixed costs, but I assume they are smart enough to make those calculations.
The allocation of profits down to specific activities depends on the allocation of revenues and expenses amongst activities, and all such allocations are inherently arbitrary. They depend on the stories we tell.
I think you missed the part where they're losing ALL of my business, including dozens of flights a year.
>I assume there are lots of smart people working at airlines that can work out which of their policies earn and lose money, especially now that all the competition is minimal except on the most popular routes.
I assume they think customers with lots of miles banked won't go through the effort of dropping them entirely. I think they're wrong.
When you're losing customers that have million miler+ status, you've made a pretty poor decision.
Crazy to think JetBlue wanting Spirit. I remember when JetBlue started, their goal was to provide a better experience than all the other airlines. It is really a cutthroat business. Virgin Airlines had to be folded into Alaska too.
https://www.cnbc.com/2017/10/18/branson-says-alaska-air-was-...
I agree with you on this. Nobody who flew Delta did it for the value of SkyPesos anyway. The airline miles on Delta have historically had the lowest value among US major carriers and that hasn't gotten any better, so frankly I have no issue giving up my miles. I flew Delta for better hard product and a better set of co-brand + FF perks. By changing the latter, the difference on the former is mostly ameliorated, and the miles are basically meaningless. At most a skypeso is worth maybe 1 cent. A million skypesos is only worth $1k in EV, and that's being generous. A one-time cost of $1k that isn't even a fully realized loss (I can always use the miles later without seeking status) is nothing compared to the betrayal of the program changes.
Then I moved to New Mexico, and found that Delta was the obvious choice for getting to London from here. And OMFG ... the difference in the product was just spectacular. Seats. Food. Movies. Uniforms. Air quality (not kidding). Probably will still use them when I do this journey.
United domestic routes are disgusting though. Most of the planes are falling apart CRJs without IFE and WiFi, and if they do have WiFi they charge you for it, and the domestic United staffers are not good. I would put United service quality on-par with Spirit or Frontier. Easily the worst in the big 3.
That said, I'd still rather develop status on United, take directs, and then fly Polaris full-fare or Singapore Airlines biz class for my personal / international trips now that Delta has made these changes to the medallion program.
In good times, airlines rarely profit 10%. I'm guessing it averages closer to 5%.
Are you spending $200k+ on flights per year?
Otherwise, they aren't missing $10k+ in profit.
Really, I think if anything I might be underestimating the fallout from this in that I don't see it being an issue at all and I think most airlines will follow with the same changes in the future.
Even next year's thresholds are not that high if you're crossing the continental US multiple times per month and are surely less than the flying you're doing on Delta if the loss of your business represents "10s of thousands a year in profit".
Delta's gross margin percentage is roughly 25%. For them to lose just 2 10 thousands in profit on you, you'd be spending $80K with them and doing so would continue to easily qualify you for Diamond, whereupon you'd get more reliable upgrades and service from them due to fewer people making Diamond each year.
I can spend $35k on flights, but I can also fly private for about the same amount, excluding most trans-oceanic. So I'm not sure what I'm going to do about next year. I'm not sure if it's really worth it. It's a weird calculus. To hit the number, it's basically buying a bunch of F/J fares. If I'm already doing that, I don't care about upgrades.
No more worrying about upgrades, middle seats, air-ragers, and all it took was a little more money.
Of course now sometimes I fly on airlines I’ve never heard of whereas previously, I had taken exclusively American for my last 200 or so legs. I think the effects of shaking up these programs will be to make consumers like me much, much less brand sensitive.
Air Canada spun out aeroplan, and then years later re-acquired it.
To be honest the whole approach always felt like some form of corruption/kick back to me. You give an incentive to the employee that is dissociated from the interest of their employer.
This is mitigated by the employer setting rates, per-diem, rules on what seats you can purchase, etc. and the employer can't use the points from the frequent flyer program anyway. If there's, say, a $50 fare difference and that causes an employee to choose a more expensive flight (because the comparable flights are comparable) because they get points it's fine and basically an added benefit. In consulting for example that's a stated benefit in employee handbooks.
Of course that's not to say employees of companies can't go against the interest of their employer here, but it's up to the employer to set guidelines and for the employee to follow them.
This isn't always true. Some employers insist you book through their internal travel department or use their corporate FF accounts, which kick all the mileage and hotel night benefits to them. It's not common, fortunately, but it does happen.
There’s indirect benefits to the business as well since they’ll be first to be put on a flight after cancellations, can get guaranteed lodging in areas that sell out often, and can use their points to upgrade making their trip nicer.
So it’s unwise to chase that as an employer. Let them get points and be comfortable and use them to take the family somewhere.
Is this a thing for most people?
Being in an unfamiliar place is one of my greatest joys. I am never more relaxed than my first day in a new city where I know absolutely nothing, and turning each new corner is a revelation.
Wow, okay, big jump here buddy. What happened to being profitable and actually committed to offering a core competent service to customers?
As the joke goes, “how do you become a millionaire? Start with a billion dollars and buy an airline”.
It is only recently the airline business has had steady positive years, due to consolidation, and even then, COVID hit and almost wiped them out were they not bailed out.
Modifying a rewards programs should require a very miniscule portion of ann airline’s available labor hours, and aligning rewards to be proportionate to profitability seems like a common sense business move.
That they should spend more money and lower profit margins even more? Or that they should increase prices so that they can spend more money to improve the things you listed?
Surely, airline employees are more knowledgeable about how much customers are willing to pay than non airline employees.
Shouldn’t
Be
Banks
There is one step, and it is bank (Past a particular threshold).
https://www.investopedia.com/terms/f/financialization.asp
https://en.m.wikipedia.org/wiki/Carcinisation
https://www.catb.org/jargon/html/Z/Zawinskis-Law.html
Those observations aside, I do agree with your rough rhetorical position.
Have you flown on an airplane in the last 10 years? I'd rather drive 15 hours to Florida than deal with the fucking airlines
I end up paying roughly $50 per hour of flight plus or minus, and it’s been consistent for my adult life (15+ years). Which is surprising considering inflation.
The only problems I have with flying are TSA and airport runway congestion itself.
Easy to say when you have money
I jest, but which airlines have you been on? I've enjoyed my airline experiences more now than in the past flying Delta, American, United.
But yeah I agree, if it's less than 6 hours I'll almost always just drive.
Assuming you're talking about the 1978 deregulation, I don't think that's the cause. Starting around about the same time (maybe under Reagan?) the US basically stopped enforcing the anti-trust laws that are on the books. This has led to mergers across the board, not just for the airlines.
that said, I doubt airlines will ever fully relinquish control over their loyalty programs - they are too critical to the core business and offer a 'secret sauce' of differentiation to what is an otherwise commoditized product (i.e. flying from point A to B).
I am both of those things, have held status with Delta for a number of years along with a co-brand credit card that I run $60k-$100k/yr through. I typically take 15-20 trips per year, and when I'm /not/ flying on business I only fly first class/Delta One. The new program means where formerly I was always PM/DM each year in status, I would be lucky to hit GM without greatly changing my spending habits, and the lounge changes massively devalued even carrying a co-brand card. I live in a competitor's hub (Denver) and chose Delta over the competitors specifically because of better quality of hard product, better on time rates, and a good co-brand program with Amex (who I'm a loyalist for).
I am actively investigating alternatives, and at this point am likely to cancel my Delta Amex (I'm keeping my Amex Plat of course) and switching to the United Club Infinite card as my primary travel card / credit card. Delta makes more money from their co-brand relationship with Amex now than they do from operating flights, and they're losing both of my business because of these changes.
Business travelers almost only get booked into economy/main cabin in the US, because of corporate policies and no health and safety regulations in the US requiring higher tiers of service for long flights (EU residents generally get booked into business for transatlantic flights for healthy and safety reasons, DVT is no joke). Being able to maintain status off a reasonable amount of travel and co-brand spend so I get upgraded into FC on business flights and can buy FC with some perks on personal flights is the core value proposition of airline frequent flyer programs. Delta just killed that for their core customer base. To be clear, I had already bought 6 Delta One tickets for next year, and I haven't even booked my end-year trips yet. I purchased 7 Delta One tickets this year and 6 domestic First Class tickets, I'm also on track to run $90k through my co-brand card this year.
They're losing a not inconsequential amount of business with my departure to United, which when they're finished will have over 100k sqft of lounge space in the Denver airport, plus a Polaris lounge, and offers unlimited lounge access with their top-tier cobrand card and I can attain status even /easier/ than the /current/ medallion program, much less the new one. With this change the only advantage Delta gives me for having to eat a connection on every domestic flight to go through SLC/ATL/LAX/JFK, is that they have free wi-fi on board. That's great, I guess, but I hardly ever even use it, I'd rather unplug and read a book while I'm in the air. The hard product is marginally better on domestic Delta flights, but Polaris is actually better than Delta One anyway, and United has better international partners in Star Alliance, like Singapore Airlines, than Delta does (although I do love KLM).
I find the changes in the medallion program to be incredibly short-sighted, and I am expecting it to backfire horribly. Delta built a lot of brand loyalty with travelers. People like me who will choose Delta over anyone else even though I'm in a non-hub location and it implies always eating a connection, partly because the Sky Clubs were high quality lounges, broadly available even in non-hub sites, and they had a solid FF program w/ good co-brand perks. They've just lost most of their advantage except their operational quality, which also has taken a nosedive post-pandemic. Explain to me why I would choose Delta over United, when I live in a United hub and get can get better perks on the co-brand card, for someone who can afford to pay for multiple full-fare business-class international tickets a year?
Its stunning to me that these changes have managed to alienate so many people across the spectrum. Its not just the higher barrier to entry for the lowest tier that is earning complaints. The value of the miles earned was always much less important to me than the value of the occasional upgrades the status provided, or very occasionally the special support phone lines.
Perhaps the reality for the program really is that only the "whales" matter. We certainly see that play out all over the software industry. But if that's the case, it sure changes my porpoise-sized travel habits. My loyalty will now be to Amex moreso than an individual airline.
I'll enjoy my last year with GM in 2024 I guess.
Of the options I have for BOS <> SFO, Delta still probably has the best hard product offering there. But this is definitely changing my dogged loyalty. I'll be trying Alaska soon enough. Not sure I'll ever do United again...
Isn't this effectively what we have with Chase, Amex, Capital One, and Citi? Each earns points that can be used directly or transferred to airlines and hotels.
And then as further evidence, Avios points can already be used across several airlines (BA, Iberia, Aer Lingus, Qatar, and soon Finnair). Not to mention the ability to book flights on different airlines with miles sometimes (eg booking Delta from KLM).
Not really. Those companies aren't sellers of points, they horse trade the interchange fee. They're basically giving away a portion of their revenue just to stay competitive.
If I have the monopoly of buying miles from airlines at 1c/mile and then sell them to co-branded credit card companies for 1.3-1.5c, what I have is a fucking license to print money.
At a deeper level airlines and business travelers have no real business relationship. Employers are buying a service, airlines are selling a service. Business travelers are the "cargo" that airlines are shipping. Businesses pay airlines to ship this cargo. Airlines have no relation to the cargo.
Employers also pay the cargo (their employee) a wage. But they funnel part of that payment wage through airlines via miles. It's not much different than company sponsored health care, but it's company sponsored vacation/personal travel. It's an employer benefit, but not treated as one.
For my next business, I'll personally pay companies' decision makers to choose me as a supplier.
Hell, why stop there? I'll also pay politicians and judges to rule in my favor!
What you describe is one end of the spectrum (and probably illegal). But the line between that and good old discounting isn't very wide.
discount -> p&l -> budget -> bonus
Now you're getting it!
Someone must have spotted the opportunity, because we have one particular supplier who is approved, and basically you send them a list of what you want from whatever store/supplier/etc., and they send back a quote for the item(s) which is just the retail price plus a 10% markup. You order the item(s) from this approved supplier, and they just order it from the original source and have it shipped to you. A huge portion of the things that we needed to get for day-to-day usage ended up being ordered through them (software, lab equipment, hardware debuggers, etc).
Seems like a great gig if you can pull it off. Most likely this is just a 1-person outfit where they spend 30 minutes a day placing orders and generating quotes then just take their 10% of everything. I've always wondered if this business was started by someone who formerly worked in the procurement department and added themselves as a supplier before leaving.
or golf trips, fancy dinners, etc.
Shouldn’t this be taxed as income?
A portion of the money paid by company A to company B goes directly to the employee of company A. It would be taxable if A paid its employee directly, so what difference does it make if there’s a benefit program operated by B in the middle?
The guidance is from 2002. The airline reward programs have changed in the meantime. As the original article notes:
”In short, SkyMiles is no longer a frequent-flier program; it’s a big-spender program.”
So I wonder if the IRS might come to feel that rewarding spend is different from rewarding miles flown. Unlike air miles, the benefit to the employee is in direct proportion to the money spent by their employer.
https://www.investopedia.com/ask/answers/110614/are-credit-c...
> So, where do cash-back reward programs fit in? It varies. If a cash-back reward is credited directly to your credit card account, then the income is generally considered a nice rebate that comes with the benefit of using the card. If you actually receive a cash-back check directly, though, it gets a little trickier: It probably also would be considered a type of rebate, but it could technically count as income.
No, it's just a rebate/discount made directly to the purchaser. For tax purposes, if they buy something for $100 and get a $2 cash back, it just means they spent $98.
It's very different when there's a third party - employee - involved. The "reward" is going to someone who never spent any money, and so generally would be considered taxable compensation to them. OF course, regulatory exceptions in the tax code are nothing new, and it seems like this might need to be re-visited soon.
That would be the equivalent of the airline situation.
As a government employee, I'm pretty jealous. All our spending has to go through a credit card with no perks, rewards, or identifiable appeal, presumably because it makes the data harvesting easier. And you have to identify on the front end whether each thing is a valid expense so you know which card to use, rather than just filing relevant line items in a claim on the back end. The only good thing about the government travel cards is that they're physical objects, so you can sometimes lose them and then get to fall back on a card that does something for you.
Families with children are also allowed to board early, because they slow down the boarding process otherwise.
I wonder how long it will take the IRS to catch on and see this as a taxable benefit. It's like if significant business spending was done on Discover cards that paid its signer personally. Since it's been going on for years, maybe there is an exception written in law?
Speaking of taxes, the guy who bought a billion yogurt cups to earn trillions of miles donated the yogurt and received a tax benefit:
"Earning enough points to take my family on a free vacation each year is compensation for the time I'm gone"... "My wife and I get upgraded most trips we take because of this benefit"...
Actual tone-deaf quotes at a time when we were laying people off (not to mention that corporate cards had been around for a while and had been 'encouraged'. And most other managers had already mandated their use.
It's a perk. But when it's a perk only some people get, or get more of, you can't expect too much sympathy from everyone else when it's taken away.
They aren't comparing their situation to others within the company, but rather to individuals at other companies for whom this perk is widely available.
It's really surprising to me how intensely some people will pursue relatively worthless airline miles. I suppose if you're going to be traveling anyway, you might as well pick them up. But if you have the choice, it's not really worth the trade-off.
I'd take a company card any day.
Having to travel a lot is a known disadvantage of having one of these jobs. The ability to accrue miles or do in-lieu travel is touted as an offsetting factor for this. It’s literally mentioned as a part of the compensation package at places like job fairs or in interviews. In my past consulting job (and on places like r/consulting), people would literally calculate the dollar value of the miles/status you can accrue and would use it to compare compensation packages.
Losing this “perk” is more akin to having commission pay be a big part of your compensation, but then being told you’ll no longer get commission. It’s a material difference to what you expect to be paid.
I'd challenge anyone to find an employee handbook that specifically references expense reimbursement in this context. Indeed, ours has always said "corporate cards should be used whenever possible". This was just changing to more forceful language.
> Is this a good deal for the American consumer? [...] Certainly the system is bad for Americans who don’t have points-earning cards. They pay higher prices on ordinary goods and services but don’t get the points, effectively subsidizing the perks of card users, who tend to be wealthier already.
It's the economics of "scrip". https://www.investopedia.com/terms/s/scrip.asp
I saw this for real when traveling with a coworker when they had status and I didn’t. One of our flights was delayed, leading to me being stranded overnight and have to get the company to pay an additional $300 to stay in a hotel, while my statused coworker was rebooked with priority on a flight home due to their status.
The cut is limited to 0.2% in the EU. This regulation basically kills all the transfer-from-poor-to-rich point schemes and leads to transparent pricing.
Once you work out how much you're being "paid" to deal with the thought and hassle, it becomes kind of embarrassing.
The only thing keeping most points-accumulating customers from being angered about this (while there is a hardcore group of fans who track it) is that no airline is required to publish the history of inflation/devaluation. And the airlines hide it behind having changed from actual static charts showing what an airline mile is worth, to now floating dynamic pricing, which completely obscures what has happened. Sell tons of miles dirt cheap to credit card companies, and devalue the miles when it comes time to redeem them.
Of course, that is their right, and this is not a state currency, and these are "bonuses", not some entitlement. But people should justly have lowered their faith in it from the beginning. Although you might say the same thing about lotteries -- people are participating in those voluntarily, yet those are regulated and have restrictions on what they can and can't do.
But anyway, now people just discover that the 200,000 miles they'd been working towards for years no longer even buys the ticket(s) they thought it would.
It has made me, personally, seriously lower my loyalty or pursuit of loyalty for any future promised benefits.
(and an end note/minor side story, this applies not just to points/miles but also elite status -- the perks you get for loyalty, such as better seats during flights, lounges, check-in, etc. Airlines have devalued these just as well, by letting the ranks of "elite" customers swell through credit card spending qualification, promotions, etc, and then devaluing the benefits at the tiers of qualification. They're glad to shovel people in with promises which then turn out to be not worth the benefits you thought. Or they add a secret higher tier that you didn't know about.)
Being able to continuously arbitrarily devalue them is the whole point of designing a rewards system with “miles” and “points” or whatever non official currency unit.
Which is exactly the point of creating the fiat money system in 1914. Have you noticed that the dollar has been continuously devalued ever since?
And no, it wasn't to "stabilize" the monetary system. That is just propaganda.
-- Monetary History of the United Stats pg 193
Here’s what you all get wrong about this: if I can’t withdraw, it’s not a bank. Points are just prepaid assets and services that you may or may not be able to ever receive. Bank money does not simply “expire” (it can be used for fees however)
Again, X is the dumbest possible name for aything, I will never user it, just call it Twitter if you have to.
No one is saying X, the platform formerly know as Twitter, is a bank.
This seems to describe a lot of sectors of the economy, unfortunately
Legal services alone are about 3% of GDP.
This understates things, perhaps, as it's unclear whether it captures the financialization of non-finance sectors. (e.g. auto leasing, and what the article in the OP describes.)
Needless to say, this is historically unusual. And you don't need to go very far back in time to find a period where manufacturing was 25% of GDP and FIRE just 10%.
"Just a bank" doesn't fly airplanes. It may own them, but it doesn't fly them. "Just a bank" doesn't sell tickets. Doesn't have a department that finds lost luggage. Etc.
But "airlines are financialized now" doesn't capture eyeballs in the same way.
I don't know. Big companies sometimes do silly stuff - even if this day it's mostly outsourced to marketing agencies. It wouldn't surprise me to learn that some bank somewhere is operating a de-facto airline for some reason that somehow makes them money...
The banks either did this themselves or had a company that did it for them. They physically flew checks to the city of the bank they were written on, because flying the plane was cheaper than one day's interest on a billion dollars worth of checks.
This stopped, IIRC, back in the 1990s, once electronic settlement got fast enough.
"What is a bank?
A bank is a financial institution that is licensed to accept checking and
savings deposits and make loans. Banks also provide related services such as
individual retirement accounts (IRAs), certificates of deposit (CDs),
currency exchange, and safe deposit boxes.
There are several types of banks including retail banks, commercial or
corporate banks, and investment banks."
Notice how none of that is to do with how much money is made from financial shenanigans vs products and also there is no mention of running loyalty programs etc.
Every time there is one of these articles ("Starbucks is just a bank" was another recent offender) it's worth actually referring to the definition of a bank and reminding yourself that unless the article is in The Economist, the FT or the WSJ, the journalist themselves probably has absolutely no idea what a bank is, or does.
Yes big companies have big financial and treasury functions. Maybe that’s surprising to some folks, but not to anyone who’s actually worked in any kind of industry. Trying to fund your activities is one of the most important parts of any business and companies who get really good at that even sometimes find ingenious ways to make it generative of PNL in and of inself. That doesn’t make them banks or financial institutions.
My favourite example was one a friend told me that he had learned at business school doing an MBA. They did a study on Bailey’s Irish Cream (the liqueur). It came about apparently because there were big government subsidies to support dairy farmers and support Irish whiskey producers. So the farmers and distilleries where producing far more than they could sell in order to collect the subsidies. The genius inventor of Bailey’s came up with the business idea of getting the producers of cream and whiskey to pay him to take their excess inventory which he then turned into the liqueur which he sold for a profit. So he had a manufacturing business where he was getting paid by every part of his own supply chain.
If the answer is no, then they are not a bank.
A bank doesn't need to fly planes to be in business
That really is nothing whatsoever to do with what an airline does.
"Porsche yesterday revealed it earned three times as much money from trading derivatives as it did from selling cars"
https://foreignpolicy.com/2007/11/14/porsche-makes-more-mone...
> Another London-based analyst said: “[Porsche] is a hedge fund investing in just one stock [Volkswagen].”[0]
> Because of its heavy reliance on Volkswagen's manufacturing capabilities, Porsche knew it had to increase its control [of Volkswagen] to mitigate the risk of its production being affected. Porsche used debt to start buying Volkswagen shares on the open market. [1]
> All of the options-trading Porsche takes part in relates to its stake in VW, which it has built up from scratch over two years. Porsche used the options to hedge against the likelihood of VW’s shares rising after its interest was made public: they did, from about €40 to almost €180. [0]
They wanted to buy a chunk of VW. After they started doing so, they hedged against the stock price so that they wouldn't get screwed if the price of VW popped. Then the price of VW popped, and their options paid out big time. That doesn't make them a hedge fund, it just make them competent (and somewhat lucky).
[0]https://foreignpolicy.com/2007/11/14/porsche-makes-more-mone... [1]https://dailyinvestor.com/world/10426/incredible-story-of-ho...
Starbucks is another good example of one that does (with gift cards instead of points); Amazon might be another.
Starbucks does not get to keep unredeemed balances indefinitely in most US states!
Regardless, the underlying point remains. They'll profit from the float until whatever it is they have to do happens.
> They "make" money when you leave a balance on the card.
In many US states, the money interestingly goes to the state in the end when unused, under a common law doctrine that doesn't exist in many other countries:
https://en.wikipedia.org/wiki/Escheat
In that case, there is no breakage income for the gift card issuer, but the interest free loan, together with people's tendency to spend higher total amounts at the same merchant when using gift cards, still makes them an amazing deal to the issuer.
I suspect that there's also a non-negligible benefit being exploited in the form of differences in subjective value between gifter and giftee: In a nutshell, the gifter spends more money than they normally would at a store they frequent, or viewed from the giftee's perspective, they spend "money" at a company they normally wouldn't.
Then there's the broader question of whether this is good for productivity. If every company is a financial company, who actually makes tangible stuff?
/s
Hyperinflation is coming, the kind that will be THE central issues for everyones life for awhile. When it happens it won't be these guys fault. I would not blame airlines and home Depot credit cards for the coming hyperinflation, just a symptom of its approach.
Before folks make comments about currency still inflating (gerund), let us stipulate that the noun "Inflation" is a positive rate and the rate has recently decreased. Let us all be thankful that there exists some amount of inflation which in a broad sense reflects a growing and dynamic world (how closely remains to be seen) as opposed to deflation.
If you needed a wheelbarrow of cash to buy break at the bakery, it was still true that there was a tiny downward pressure from the baker in that the bread would eventually rot, so he might as well sell it now if they were just shy of the asking price.
If everyone's buying household goods off of Amazon, their pricing algorithm will never be even that much forgiving.
When it last happened here, many workers were still being paid in cash as soon as the timeclock whistle went off on Friday. Now everything's direct deposit, but not necessarily instantaneous. At my last job, the funds were released at midnight that payday, but with the current job for some reason they're not released until the morning (business open, I imagine).
Are people going to starve, because they have the wrong bank and the money's not there for several hours before everyone else's and it has lost too much value?
I suppose everyone has their own priorities, but it's insane to me that someone would willingly take layovers, crappy routes and less desirable destinations just to chase airline status for a given calendar year. And for what? An eventual upgrade that may never come because someone else bought a higher fare class or business is full? Free access to cheap beer and sad sandwiches inside a packed lounge? Slightly earlier boarding, which any $95/yr airline credit card would give you anyway? These so-called perks can't be more valuable than the time wasted gambling on dodgy connections.
At the end of the day, it's easy to hack the system: just do what 99% of the people are too lazy to do. Plan trips early and study routes carefully. Use 3P tools to optimize fares. Pack and travel light. Arrive early at the airport. All these are much cheaper than what airlines are asking to bump your status level and go a long way in making the perks feel like they don't really make that much of a difference.
[0] https://en.wikipedia.org/wiki/Jamie_Zawinski#Zawinski's_Law
Strategies like these are great, otherwise those empty seats just go to waste.
I consulted for an online travel company. Interestingly in source code stuff like airline tickets were collectively called “pGoods”. After a while (limited documentation) I found out the “p” stood for “perishable” which is an apt description. Of course airlines provide a service, not “goods”. — naming things.
Here is the thing. Often, when travelling for work, the company pays for the flight, but the traveler get the points, the traveler can then use the points for personal travels.
Maybe the frequent flyer programs are worth more than the business of flying planes, but without business travel expenses, my guess is that you wouldn't have these bank-like frequent flyer programs. As the article mentions, these are just kickbacks.
You sell a couple of items on eBay, yeah it's fine not to report that as income. But if you sell tens of thousands of dollars worth of stuff on eBay the IRS would see that as taxable income.
Your kid has a savings account with a hundred bucks in it and they earn a few dollars interest - not taxable! You keep $100k in a savings account and earn thousands in interest, yep the IRS gets notified and you pay taxes on it.
You earn a handful of frequent flier miles this year after a couple of trips home to see Grandma? Nah, that's not taxable. But if you travel multiple times per week for work and accrue tens of thousands of dollars worth of flier miles that you get to keep? Not taxable income for some reason. shrug
Those would never be taxable, as you paid for the miles. When a company sends you a rebate check for an item you bought for personal consumption or when you buy a gift card, it's also not taxable income as it's in exchange for [post-tax] money that you paid.
> But if you travel multiple times per week for work and accrue tens of thousands of dollars worth of flier miles that you get to keep? Not taxable income for some reason.
The IRS alludes in their policy statement to the complexity as being the reason to not treat it as income. If I flew for work for a decade and accrued a bunch of miles and redeemed them only later, in what year would they be taxable? If I mixed personal and business travel in earning miles, what portions would be taxable and when? If the miles are subject to a substantial risk of forfeiture, that would usually be treated the same as other possible future income which is still subject to a risk of forfeiture (which is to say: not be taxed until that risk has collapsed to zero).
Good point.
> If I flew for work for a decade and accrued a bunch of miles and redeemed them only later, in what year would they be taxable?
The year you redeem them I would think. Just like you don't recognize typically recognize investment gains until you actually sell and receive those gains. It'd be nonsensical to tax me on fake airline bucks for an airline that might be out of business later this year, or might devalue their points. The (as I would see it) taxable benefit occurs when I successfully redeem those fake airline bucks for a real, valuable service.
> If I mixed personal and business travel in earning miles, what portions would be taxable and when?
Seems like you'd need to maintain separate accounts, so when you redeem them you say, "yeah I'm using 20k points from my personal account and 30k from my employer-paid perk account, knowing I'll be taxed on the current value of the 30k taxable points".
Overall it does seem like a PITA, it's just funny to me because "this is too much of a pain to deal with so let's ignore it" doesn't seem like something the IRS usually says. I suppose overall the issue must be (as another commenter put it) "small potatoes" to the IRS.
Those miles seem to me to be close enough to securities that I'm not sure why the same rules don't apply to them.
Companies have on occasion tried to claw back frequent flier points from employees. Those policies were not popular personally I have zero issue with people who fly a lot getting a minor perk for a lifestyle I suspect many people here would absolutely hate.
If you got rid of business passengers, you'd have to increase rates to get the same profit, sure, but I suspect competition would keep prices low. The reason business rates are higher is because big businesses don't look too closely at prices and better service is seen as a little perk for employees.
Business travel, especially sales, also involves a lot of last minute booking and changes and those are expensive on both many planes and long distance trains. But, yes, at most companies you can’t just book business but you can always plead better schedule and also avoid economy basic sort of torture.
By far, the biggest costs of running an airline are the planes and the fuel. But the investors don't want to bet on the value of physical planes, nor do they want to bet on the price of oil. If they wanted to place those bets, they'd just invest in Boeing or Exxon. Instead, they usually want to bet that one airline will perform better than her competitors over the next year or so.
So, airline executives lease their fleets and buy tons of oil futures. This gives them a better shot of hitting their targets even if the price of oil skyrockets, it makes their fleet easier to scale up or down according to demand, and it makes their stock more attractive to investors who want more predictable performance.
Assuming they're mindless drones of the faceless "investors" with no free will or intent of their own.
> But the investors don't want to bet on the value of physical planes, nor do they want to bet on the price of oil. If they wanted to place those bets, they'd just invest in Boeing or Exxon.
You're putting the cart before the horse since that's a choice by the exec. If they wanted to derisk themselves they could as well hedge by buying puts on Boeing or calls on Exxon.
Overall, who decides what a good business is? Unfortunately, that's come down to a gang of Wall Street suits who would much rather punish good businesses for not catering to their attention span deficient trading/gambling habits. We would much rather have some jack of all trades making business decisions based on their next year's bonus/chalet/yacht rather than people who depend on those businesses (customers and employees), so of course we get to this state.
Think of Netflix using AWS. Digital content delivery is obviously crucial to their business (DVD deliveries aside) but it's not vital that they own their own servers — they're first and foremost a video streaming service, not a CDN datacenter business.
There are also various types of leases [1], commonly "wet" or "dry", which are analogous to managed/unmanaged/raw metal cloud services.
In a nutshell, when you buy an asset you can depreciate the value of the asset over the working life of the asset and in many tax jurisdictions (my knowledge/experience comes from the UK and US asset financing industry) offset that depreciated amount against profits, in the year the asset depreciates.
This means that you can essentially offset capital expenditure against tax, which is good business.
But if you don't make enough profit through the use of the asset at the right time, you end up losing the benefit.
But there exist large companies that make lots of profit, such that they can always offset the depreciation. And so _they_ can buy the asset, use the depreciation against their profits and then lease the asset to you. They might even be able to do this at a rate that ends up _being cheaper than you actually owning the asset_, depending on circumstances.
I mean AWS is the obvious example, that's basically leasing your hardware. But even companies with on-prem data centers lease most of that gear. It's way better for cash flow to make monthly payments than an up front one.
If it costs on average $X/month to maintain a plane, then the maintenance company is going to charge you $(X+Y)/month, where Y is a decent profit margin. Certainly you'd save money by not involving the third party, right?
Or are these companies happy to pay it because that $Y also covers risk of a sudden expensive repair?
$269 billion, if true. Amex normally charges more than other credit cards. Let’s say 4%, so they’d gross $10 billion in fees. That’s… that’s a whole lot of money for a single card.
1. https://subscriber.politicopro.com/article/2023/09/senator-t...
I mean, I wouldn't expect merchants would lower prices by <2% but maybe they waited longer to raise prices later? I mean debit cards are cheaper than credit cards but not by much the last time I looked (like ~1% cheaper, around 2% vs closer to 3% for CCs).
But the reality is, airlines are still airlines. They fly people from A to B, employ many thousands of pilots, flight attendants, baggage handlers, etc. In other words, no, they're not banks. Not by any normal definition.
They're banks and their currency is miles. Their customers have accounts with balances, transactions, and they make money by selling miles that they make out of thin air. They don't just create miles from travels, they also sell them for real money to customers and business partners.
They're "more" banks than airlines in the sense that their loyalty programs valuation is roughly twice that of the airlines themselves.
In short, not a bank.
That or be rich and always fly first class.
How often do you manage to book the exit row seats? I assume a lot of non-tall folks take them too just for the extra space.
There is availability from SF to Munich on the 25th for 78k miles - go enjoy Oktoberfest!
It sounds like their actual issue is CC fees, so why not write about that? Why not demand congress institute fee maximums or something? Meanwhile, I still don't understand what the actual harm is in airlines being "quasi-banks", other than these fees which are not set or managed by airlines.
The word "air" in "airline" implies that the main purpose of the business is to move passengers and freight via aircraft. If the main purpose of the business is to generate credit card swipe fees it will probably not do a good job at moving passengers and freight through the air since that part of what it does doesn't generate most of the profits. And we've seen this already with the onerous fees and packed planes that are the standard model now ... because each airline has a captive population that flies it because that is where their points are.
And the ones that give a cash kickback (1.5% or occasionally more with a few specific cards) are even easier and more straightforward about this.
Suppose someone wanted to reverse this trend and just make everything cheaper rather than having interchange fees of which the cardholder gets a fraction back? What incentive structure would move towards a model with goods whose prices don't need to buffer the 3+% haircut of credit card fees?
I don't remember it exploring the larger impacts related to government and such but instead digs into how exactly airlines make money from this system.
Key point: airlines are more powerful than normal banks - they are central banks, with complete control of the money (point) supply. On the trilemma [0], they chose to control the exchange rate (points to flight value) and have an independent monetary policy (how many points to issue to flyers or other buyers).
Points-miles are a way for airlines to lock and keep their customer base while treating their customers like cattle.
> They make more money from mileage programs than from flying planes—and it shows.
Delta reported 5% of its revenue came from its loyalty programs in 2022 (2.5B of 50B according to 2022 10k). Although in the June annual shareholder meeting, it expected >6.5B in AMEX remunerations in 2023 with a long term goal of 10B.
American Airlines may have been closer to 10% (4.5B of 49B according to 2022 10k). I can't quickly find any public data on it's long term goals.
Both still well short of "more money" than from flying planes.
I expect the author is saying that if your split each up into profit, the profit is greater on the rewards program than the flying part.
They're like banks in the same way insurance companies are like banks and can make make money on the float.
That's not what this is saying. I'm not sure what it's saying. It's a cutthroat industry where infrequent travelers (and there are a lot) have driven margin for economy seats booked early to almost zero. So you make money on premium services and loyalty for customers that are less price sensitive. Thinking about miles like a real currency gets you lost in the weeds of what's just a complex loyalty program.
Edit: a word
I think you’re ultimately right, but finding an investor would be irrationally difficult.
There are tons of airlines. I can often have my choice of airlines to fly to a particular city, nonstop, within a given hour. Where's the lack of choice? Economy tickets range from cheap to very cheap, unless you need to fly somewhere like Guam. Renting cars and booking places to stay are both significantly more expensive pieces of traveling. As long as that's true, it's hard to justify flights getting that much cheaper... unless you're flying a family of 6+, in which cases you're part of a small market.
Night/hotel trains only make sense with decent density.
True here, true of auto manufacturers, increasingly tech, housing, etc.
The part of the equation that I think the article is missing is that air travel is an industry with an extremely high level of substitute options. Rewards programs are there to try and combat the fact that their products are 100% interchangeable and create some level of loyalty.
Yes, they're also a convenient financial instrument, but I'm personally failing to see how that's a problem requiring intervention. Even with these programs as a profit center, airlines are overall some of the lowest profit margin businesses you can find. There aren't many travelers out there who have much justification to be upset about the prices they pay to fly when the airline is only making single-digit percentage profit off their flight.
The article, in my opinion, was too zealous about advocating for reinstatement of a style of regulations that I don't think makes a lot of sense for consumers or the airlines. It's well-understood that fares decreased and service volume increased after the Airline Deregulation Act was passed. Many aspects of the defined routes and fares setups of the Civil Aeronautics Board actively stifled competition by preventing competition from entering routes and fixing prices.
> The Civil Aeronautics Board decided which airlines could fly what routes and how much they could charge.
Doesn't that sound kind of awful? This would be like your local health department regulating the precise recipe of each meal served at a restaurant, going above and beyond regulating health and safety practices.
The article acts like the airline industry is just 100% devoid of regulations, but that isn't at all true. For example, airlines are required to advertise the tax-inclusive airfare, required to refund fare plus penalty in cash in the event of bumping overbooked customers, and obviously long list of safety regulations, and numerous other requirements.
That's the entire point of a free market. Obtaining perfect competition. If you are producing a product that cannot be easily substituted then you shouldn't get to have a fully free market. Customer lock-in is the opposite of the concept and benefit of a free market.
Second, and industry with high startup costs, extreme barriers to entry, limited access to fixed resources (airport runways), and is of strategic importance to a country will always be regulated. Airlines will never be left to die (like for example the NFT market) - and we saw this during the 2008 period. And if you're going to socialize loses and have govt as your back stop there are rules you have to adhere to to ensure customer benefit.
To start an airline all you have to do is lease planes and gates and hire an interchangeable labor force. You don’t have to develop any technology outside of your reservation system, no factories, no research and development.
An example of a recent airline startup is Breeze Airways.
I agree - but thought of it a different way.
Delta has a reputation among frequent flyers for having the best operations of any domestic carrier. AKA, if you need a flight that gets there on time, Delta is your best bet.
So, I expect these changes to their frequent flyer program (which pretty much all frequent flyers have reacted to with universal hate) are a recognition of that. AKA, we're offering a good product, so why should we be generous with our mileage/reward program.
Delta were already regarded as having one of the least valuable award points of any program.
As to why the changes are so hated, take this example.
Imagine you're flying economy 1x a month from Los Angeles to Amsterdam on Delta. Each flight would cost around $800, and earn you 11,120.
Under the current program, you could have Silver Medallion halfway through your 3rd trip, Gold by your 5th and Diamond by the end of the year.
(Some caviats that you wouldn't make it that far without a waiver for MQD spend you could get with a credit card).
Under the new program, it'd take you 7.5 months to earn Silver, and you'd never make it past Gold Medallion flying that same route every month.
We could limit financialization of everything if we had a national payment network like other countries, and removed the inability for vendors to prefer cash by discount.
Almost everyone buys new cars through some form of financing, and the structure of the company reflects that.
A market for options on road pricing would be useful, last mile internet service needs something more than surveillance/advertising.
Banknotes also used to be private money. Each bank issued their own. The government eventually made that illegal, but banks still issue private currencies in the form of:
1. personal checks
2. cashier's checks
3. traveler's checks (though I think Amex stopped printing them)
4. credit cards
5. debit cards
> A debit card is merely a tool to transact using dollars.
And banknotes were just a convenient tool to transact gold that was on deposit in the bank vault.
"Any sufficiently advanced technology ends up regulated as a bank" or similar
> More than 16,700 Southwest flights were canceled and 2 million passengers stranded between December 20 to 29, scuttling holiday plans and leaving mountains of unclaimed baggage nationwide.
United's appears that way for typical tickets on United/United Express metal as well: https://www.united.com/ual/en/us/fly/mileageplus/earn-miles/...
i guess if there was a way to trade miles it would get into the is it a security debate
> They make more money from mileage programs than from flying planes—and it shows.
I spend 15 minutes of my time trying to find where is shows but I couldn't. All I can see is you get points from spending money and the difference now is, people get less points and perks.
For de-regulating? Sure. But it shows that market capitalism is actually the problem, and governments are to blame for not managing, harnessing, and policing it stringently.
If you're lucky enough to get into a profession for upper-middle class people, you'll be in good shape (like most of the people on this forum). Most people don't make it. Perhaps that's where the downvotes come from, is the tendency of people to think subconsciously, "I did it; everyone else can too, it's not that hard".
Go back to the 70’s before regulation when the government enforced minimum fares.
Air travel has gotten much cheaper and far more accessible to lower income people.
That sounds like a win for deregulation.
No, I will not produce evidence for this absurdly obvious point.
Fun fact: did you know that different regulations are different, and produce different outcomes? What waves of entrepreneurs and inventors are stifled by the regulation that you can't dump arsenic in rivers?