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Comment by rainsford | Hacker News Reader

In theory this type of price differentiation is good since it allows extremely budget conscious folks to travel for very cheap with no-frills options while allowing others to travel with the same amenities for the same price except certain things are add-ons rather than built in to the price of the ticket.

The problem is that the universal implementation is that the "no-frills" tickets end up being the same price as they were before when they included things like carry on bags while tickets that include such "luxuries" end up even more expensive, leaving every single passenger feeling ripped off.

I feel like I'm missing something in this space since every airline is doing it but it makes no real sense from a consumer perspective. Price differentiation on extremely low-cost options makes sense, but only if it actually feels like a deal rather than paying the same price for a worse product, which is almost always what seems to happen.

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Customers bitch about bad service but they buy the cheapest option every time. Partly it's an information problem - the median leisure traveller flys maybe once every couple of years and has only the vaguest idea of what each airline's offering looks like, so they go for what the price comparison website says. But I think it's mostly just that people are lying to themselves about their priorities.

They're also making a sound economic decision when business class is 3-10x the cost as you often do not get a matching level of service

Right but there can be a huge difference between economy on one airline and economy on another, one that absolutely justifies paying a bit more. It's just that that difference is often opaque to the customer.

I don’t think it’s actually true that people are “paying the same price for a worse product”. This is an area where one has to be extremely careful because it’s not the case that all the input costs are held steady so you’d see a decrease in actual fare when switching to price discrimination. One possibility is that input costs have gone up but the lowest price stays the same with worse amenities.

It's just shrinkflation, except you can pay for the missing biscuits in the pack.

> The problem is that the universal implementation is that the "no-frills" tickets end up being the same price as they were before when they included things like carry on bags while tickets that include such "luxuries" end up even more expensive, leaving every single passenger feeling ripped off.

Do you have any evidence for this or is it just vibes? Given that airlines have low profit margins and customers are extremely price sensitive it seems unlikely to be true.

> Given that airlines have low profit margins

Low profit margins but companies like United can pay their CEO ~20MM?

Erm… yes? What fraction of United’s total revenue do you estimate 20 million dollars is?

Why would we look at revenue? I can sell a dollar for 90c and have very high revenue. The CEO's salary is ~2% of profits. Their profit margins were ~5%.

Assuming your numbers are accurate, if they magically were able to pay their CEO $0, their profit margins would be 5.1% instead of 5%.

What's your point exactly? How does this address my point that airlines are extremely price-competitive and will continue to be so?

Weird thing to focus on. What do you think their profit margins would be with a $10 CEO, and why?

Just basic inflation over time will make it feel true even if the increase is inflation and not "corporate greed"

Exactly, which is why I suspect this feeling is based on vibes rather than evidence.

Also any number of other things can affect prices, e.g. fuel costs.

Companies are people. People need to do stuff to justify their jobs. If they’re doing the same as everyone else, then it’s a safe change. Nobody thinks the changes are good for business, but they think they’re good for their own careers.

The problem with airline-level price differentiation is that it introduces too much congitive load that makes flying more stressful, so people will pay to alleviate the stress rather than get the features they want.

People who are less price-conscious will do that. People who are more price-conscious won’t.

A piece of this (after just plain greed and enshittification) is inflation.

Or perhaps some type of shrinkflation, just offering less services at the same price.

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