There might be some benefits to price discrimination (which is in effect what a point systems achieves) but the collective time wasted dicking around with points isn’t worth it. Make all point systems illegal.
They do it by selling data, by points expiring, and by often only allowing points when seats would be empty otherwise.
And often retailers pay more at POS terminals!
This all ties into any rewards program. It's part of the package, even if points are granted for use.
This is really the whole point. The sale of data is much less lucrative than the purchases by the customers themselves, especially for the "nicer" cards.
If you are a CC company with wealthy clientele, they tend to spend more. This means that retailers are willing to offer deals/rewards to attract those clients, and also that you want to offer rewards to keep those clients.
This is why e.g. American Express has cards with great rewards, high annual card fees to keep the riffraff away, and retailers willing to take a larger % cut in order to have those cardholders shop at their store where they presumably purchase more.
It’s more a sunk cost/commitment thing. Their approvals department keeps away low and inconsistent spenders.
At the high end it actually diminishes. Rewards cards targeting middle of the distribution are more lucrative, generally. Citi Double Cash gets you 2% cash back on purchases whereas the Amex Platinum gets you 1X on all spend worth at most 1.25% (and 5X on airfare).
Which is adjacent to: Nearly everyone loses, because the house knows the odds and controls the terms and conditions of the rewards.
This is false. https://x.com/patio11/status/1902555603534295115
If you're going to claim "the general consensus", [citation needed]. A more likely claim is "more people have read the misinformation from the Atlantic than have read the correct refutation from a domain expert on credit cards", which is sadly probably true.
And Twitter doesn’t show threads unless you’re logged in btw, so you just linked Patrick’s opinion.
(Also, the argument is not "credit cards are fair". The argument is "credit card reward programs are not a subsidy of the rich by the poor".)
> And Twitter doesn’t show threads unless you’re logged in btw, so you just linked Patrick’s opinion.
Fair point, thank you.
Some highlights of the thread, assuming that each directly linked tweet can be loaded:
Citation for people with more money spending more: https://x.com/patio11/status/1902556736956903589 (linking to https://www.bls.gov/cex/tables.htm ).
The rich are paying far more of the "payment system overhead" of merchants than the poor are: https://x.com/patio11/status/1902556925826416841 and https://x.com/patio11/status/1902557078222176449 and https://x.com/patio11/status/1902557151807119735 and https://x.com/patio11/status/1902557413275775295
Identifying the key question: https://x.com/patio11/status/1902557654603415768 and https://x.com/patio11/status/1902557795800498477
Quoting and questioning the Atlantic's claim that rewards programs aren't funded by interchange: https://x.com/patio11/status/1902558008283992313 and https://x.com/patio11/status/1902558055310434325
Citation refuting this: https://x.com/patio11/status/1902558157169152158
Quoting relevant charts and data from the citation: https://x.com/patio11/status/1902558268070711311 and https://x.com/patio11/status/1902558360530002094
Claim (not specifically citation-backed) that in fact one group getting a subsidy is lower-income consumers during macroeconomic shocks: https://x.com/patio11/status/1902559088631771397 and https://x.com/patio11/status/1902559166729802088
Observation that while wealthier people get higher-reward cards supported by interchange, poorer people get free checking supported by interchange: https://x.com/patio11/status/1902559216214134798 and https://x.com/patio11/status/1902559349655982387 and https://x.com/patio11/status/1902559372758155325 and https://x.com/patio11/status/1902559469470412913
Refutation of another part of the Atlantic article (article claims credit-card companies "make lucrative deals with airlines and hotel chains", but credit card companies pay for those deals, not the other way around): https://x.com/patio11/status/1902559896400203987 and https://x.com/patio11/status/1902560051644002726 and https://x.com/patio11/status/1902560160632963217 and https://x.com/patio11/status/1902560257282335024 and https://x.com/patio11/status/1902560386395545603 .
Patrick’s argument is flawed because it assumes that if the interchange fee pays more than the cost of providing benefits, then it’s not a “subsidy”.
This is false because the interchange fees, and in fact all of the fees, have to pay for the entire company’s operations, not just for your points program. Without more detailed data it’s not possible to rule out the possibility that points programs are a subsidy for the rich.
The second assumption he makes is that volume is the same across the board. It’s not, there’s way more customers on the lower end, and the company charges them even more fees. So sure, rich customers individually pay more interchange fees, but the company could still be making most of its money from poor customers.
Unfortunately without knowing the CC company internals we have no way of knowing. Which means that Patrick’s opinion while being an educated guess is still just a guess, so it doesn’t refute anything.
Sure. But the default and reasonable presumption is that at that scale, companies do things because they're profitable; in this case, they implement rewards programs because they make more money by doing so. In particular, the default and reasonable presumption is that companies don't spend more money acquiring a class of customers than they expect to make from those customers. The claim by the Atlantic article is that credit card companies lose money on the rewards programs for rich people. There's no evidence of that, and some evidence to the contrary.
> Without more detailed data it’s not possible to rule out the possibility that points programs are a subsidy for the rich.
That's not where the burden of proof lies. Without more detailed data it's not possible to demonstrate that rewards programs are a subsidy. The conclusion is not presumptively valid.
I'm not suggesting, either, that the argument from the linked Twitter thread is ironclad, just that it's compelling evidence against.
> The second assumption he makes is that volume is the same across the board. It’s not, there’s way more customers on the lower end, and the company charges them even more fees. So sure, rich customers individually pay more interchange fees, but the company could still be making most of its money from poor customers.
"more customers on the lower end" is in fact refuted by the data; see figure 2 (F) in the linked paper.
"making most of its money from poor customers" might be true, but note that figure 2 (E) is scaled by "percentage of average daily balance", and if you were to view it in absolute terms, it seems less likely to be true. Even if it were true, though, it's not evidence of a subsidy of rich customers by poor customers. The credit card companies very obviously think that rich customers are profitable to acquire and keep, or they wouldn't pursue them so heavily. The evidence from the thread supports that claim.
The argument being made in the thread is, precisely, if the rewards program pays for itself an individual customer, that customer is not being subsidized in any way.
If you want to claim that the rewards programs offered to richer customers aren't in fact profitable for the credit card companies, that seems like an even more extraordinary claim, and not one that seems to have supporting evidence.
Alternatively, if you want to define "subsidy" so broadly that any business making more money from one group of customers than another is having one group of customers subsidize the other, even if they are making money from both, then I'd question your definitions and use of evocative terminology. They're spending money to get a group of customers, and if they're spending more to get those customers than they make from those customers, they wouldn't spend it in the first place; if they're spending less to get those customers than they make from those customers, then those customers are not being subsidized.
Think about airline points programs. Strictly speaking the airline is losing money on it, but they judge that overall it’s worth doing.
Patrick doesn't really dispute this, but tries to argue that this doesn't matter because rich people pay more in absolute terms, so they're not getting "subsidized". Maybe this is just word lawyering over what "subsidize" means, but most people would characterize this arrangement as at least "unfair", even though rich people are paying more in absolute terms.
He also points to some graphs about how from the point of the view of card issuers, the middle customers are actually the ones being subsidized, not the rich or the poor. That might be true, but is totally unrelated to the original original point, which is about what effective price (ie. price paid - cashback) consumers are getting at shops. Moreover, the fact that they're getting a subsidy from the card issuer doesn't preclude from them getting a subsidy from the store itself.
And the thread counters that in several ways: rich people spend more in total at the store so their interchange costs are more than made up for by actual spending; and poor people are getting different rewards in exchange for the interchange system, such as free checking/banking (which was made free by using interchange fees to subsidize it so there aren't monthly fees).
To be clear, I'm not suggesting that the financial system overall is particularly fair. If you want cases where it's extremely unfair, a target-rich environment would be bank accounts that have fees that just so happen to disproportionately affect poorer people (e.g. overdraft fees).
But credit card reward programs aren't a case of transferring money from poor individual cardholders to rich individual cardholders; credit cards are a case of transferring money from poor and "rich" cardholders to ultra-rich credit card companies. The right target for the ire, there, is the credit card company, not the "rich" individual cardholders. This is a standard divide-and-conquer tactic: better to pit low-income and high-income people against each other, rather than cast attentions on the very large companies that have constructed a system to profit heavily from both of them.
Suppose people making $1M+ are taxed at 20%, and everyone else is taxed at 25%. Ignoring the small segment of people making just under $1M, most people would at least characterize this as unfair. You could plausibly this isn't a "subsidy", because the $1M earners are paying more taxes in absolute terms. However it doesn't really refute the argument that the $1M earners are paying "less". Maybe "subsidy" is the wrong word for this, but it's pretty clear this is what detractors of credit card are pointing out.
That model is not analogous to the credit card situation, in multiple ways. Among other things, it's framing this as a "tax" (which isn't inherently the right model), and presupposing that the origin of the "tax" is the credit card interchange, and mapping the "rewards" programs to a discount on the "tax" but not mapping anything else (e.g. free checking or the availability of credit instruments that wouldn't otherwise be available) to that, with a lot of assumptions about which parts of the overall system to include and map, and which parts to leave out. The net result seems like a cherry-picked conclusion to fit an agenda. If you decide in advance what you want the model to show, you can make a model to show it, but that doesn't mean that model is an accurate representation of the system.
When I said "rich people spend more in total at the store so their interchange costs are more than made up for by actual spending", I mean that on balance, they are not "costing" the merchant more, they are giving the merchant more money.
Card companies/issuers charge interchange so that the credit card company makes money; they don't do it with the primary goal of funding rewards programs, or free checking, or the other things they do for marketing purposes. That would be like saying "the primary reason this company charges for their product is to spend money on marketing programs". Credit card companies didn't pick their interchange rates on the basis of funding reward programs, specifically; they set their rates to make money for themselves.
Also, to the best of my knowledge, current law no longer allows credit card companies to prohibit merchants from charging a premium for using credit cards, or for using specific credit cards. (Credit card companies used to do this, which effectively made them a cartel engaging in price-fixing.) e.g. there is nothing preventing merchants from charging less to people with cards that cost less to accept, such as debit cards or less "premium" credit cards. In theory, doing so might create competition for cards with lower interchange, or incentives for people to stop using rewards cards. In practice, however, merchants don't do this. Given that, you could just as easily portray this as a model where merchants are choosing to value the custom of higher-income people (e.g. because they spend more) over the custom of lower-income people. I don't think that's an accurate model either, though.
I think it is reasonable to observe that credit card companies have way way way too much power to set prices for merchants, and treat that as a problem worth solving. I don't think pitting low-income and high-income people against each other is a productive way to solve that. The point of my previous comment, and of the thread I linked, was that neither low-income nor high-income people are on net "making money" from the existence of interchange or from any form of rewards programs. Credit cards make money from both low-income and high-income people alike, and make more money from high-income people, and neither one is subsidizing the other.
(Also, I'm very rapidly reaching my limit for how much energy it's worth investing into a conversation. Frankly, at this point I think anyone interested in the evidence or the accuracy of any particular model has that information available, and anyone interested in pre-deciding a conclusion without caring about the evidence has had that option the whole time, and I don't see much value in continuing. There doesn't seem to be disagreement here on the point that credit card interchange is too high, and that's not a good thing. There's disagreement on whether it's either accurate or useful to frame that as a subsidy from poor people to rich people. By "accurate" I mean "is it actually an accurate model of how the system works, for the purposes of understanding and changing the system", and by "useful" I mean "does that model actually help effect change, rather than just provoking outrage". I don't particularly think the framing as a "subsidy" serves either of those purposes.)
That's a lot of words, but I don't see how it refutes the core point which is that "rich" cardholders pay 1% (or whatever) less on their spend than someone paying with debit or cash. All you did is handwave a bit about how interchange fees aren't really like a tax, and how the logic is "cherry-picked".
>Card companies/issuers charge interchange so that the credit card company makes money; they don't do it with the primary goal of funding rewards programs, or free checking, or the other things they do for marketing purposes. That would be like saying "the primary reason this company charges for their product is to spend money on marketing programs". Credit card companies didn't pick their interchange rates on the basis of funding reward programs, specifically; they set their rates to make money for themselves.
Again, this is a lot of words but I don't see how this refutes the claim that rich cardholders get 1% back but poorer people paying with debit/cash do not. Moreover, if you're sufficiently cynical, you can claim that the government levies taxes so they "make money", not "with the primary goal" of funding schools and roads.
>Also, to the best of my knowledge, current law no longer allows credit card companies to prohibit merchants from charging a premium for using credit cards, or for using specific credit cards. (Credit card companies used to do this, which effectively made them a cartel engaging in price-fixing.) e.g. there is nothing preventing merchants from charging less to people with cards that cost less to accept, such as debit cards or less "premium" credit cards. In theory, doing so might create competition for cards with lower interchange, or incentives for people to stop using rewards cards. In practice, however, merchants don't do this. Given that, you could just as easily portray this as a model where merchants are choosing to value the custom of higher-income people (e.g. because they spend more) over the custom of lower-income people. I don't think that's an accurate model either, though.
The fact that merchants are freely choosing to give rich cardholders subsidies doesn't diminish the fact that rich cardholders are being subsidized. It might be better than some imaginary system where they're forced to subsidize rich cardholders, but detractors of cashback/rewards programs oppose such programs existing at all.
>Credit cards make money from both low-income and high-income people alike, and make more money from high-income people, and neither one is subsidizing the other.
You're committing the same mistake that you allege me doing above (ie. "If you decide in advance what you want the model to show, you can make a model to show it, but that doesn't mean that model is an accurate representation of the system."). In particular, you're restricting yourself to only analyzing the revenue/expenses from the card issuer's perspective, and not analyzing how much the customer ends up paying. It's possible simultaneously for a card issuer to be making money off of rich people, and for poor people to be screwed over by the interchange fee system. An overly simple model that demonstrates this would be a population divided into "rich" and "poor", where "rich" people use credit cards with 1% cashback and 2% interchange, and "poor" people use credit cards with 0% cashback and 0.1% interchange. In this model, from the perspective of the bank, they're clearly making more money off "rich" people in both absolute and relative terms (2% - 1% cashback = 1% profit, compared to 0.1% interchange for "poor" people). However the rich would still be paying a lower effective price for whatever they're buying at the stores.
Of course, this analysis leaves out a bunch of details, but neither Patrick's thread nor your comment tries to refute why the model above is wrong, why we shouldn't use "effective price" (ie. price paid - cashback) as the thing to analyze, or we why we should focus on some other metric (eg. card issuer profit) instead. All he did was point out some other metric and say "but these metrics say they're making money off rich people as well, so you're wrong!", without trying to refute the original claim. It's like arguing with a "replace income tax with tariffs" proponent, and having him respond to your claim that tariffs are regressive with "yeah but rich people still pay more in absolute terms so it's not regressive!".
The cherry-picking in question, here, is that you are choosing a model that claims the rewards being paid to richer people are a subsidy of the rich by the poor, by attributing one input to one output, while ignoring everything else in the system. Think about double-entry accounting for a moment: would it be reasonable to point to one inflow and one outflow and say "this inflow paid for that outflow!" as a serious model, without looking at anything else in the system? And in particular, would it be reasonable to claim that as the "core point" and demand that people refute that point while ignoring any evidence invalidating the oversimplified "one inflow, one outflow" model that privileges that point and treats it as the core point?
To draw an analogous argument, which is faulty for the same reason the credit card rewards "subsidy" argument is faulty: if a store offers a "bulk discount", is that a subsidy from poor people (who may not be able to afford to buy or store in bulk) to rich people (who on average can do so more easily)? Using the same modeling you're describing would paint it as such: poor people pay more for the same goods. I would argue that it's more accurately modeled as an incentive offered by the store that they see as on net bringing in more revenue? Do you expect that the store, upon receiving that higher revenue, needs to use it to somehow lower the prices paid by poorer people to compensate? And if they do not use it as such, and instead pocket that additional revenue or use it in some other way, does that suddenly make this a subsidy from poor customers to rich customers?
I am, in general, in favor of the argument of analyzing a system's net effect and not just its intentions. But it's faulty to analyze a subset of the system and then attribute fault or foment outrage based on that simplified model of the system.
If you want to argue that the entire system is not the perfect system, or that it could be improved, you'll get no argument from me. If you want to argue that, in general, "having money is a massive advantage for getting more money", again, that's entirely true right now.
If you want to argue that you've shown a specific subsidy of the rich by the poor, I think you haven't given evidence to support the validity of that model. And in particular (and to my mind the more important aspect of that argument insofar as the point of arguing about systems is to evaluate potential changes to them), if you want to argue that in a different system with no interchange, poor people would pay less for the same goods than they do in this system, I think you'd need more of a model of the overall system to successfully argue that. In particular, among other things, 1) would merchants actually make more in that alternate system rather than making less (which the observation that merchants make more money from higher-income customers calls into question), and 2) would merchants actually pass that savings on, specifically, to lower-income customers, which the observation that they don't currently charge different prices for different customers calls into question, and 3) would some other part of that system change as a result that makes things worse in other ways, such as products like cards or checking accounts (a checking account is a credit instrument) no longer being available to people with lower income or lower credit scores?
I'm not making this argument because I think the financial system is perfect and shouldn't be changed, or that the financial system overall is fair. I'm making this argument because the oversimplified model that foments outrage by claiming a subsidy of the rich by the poor is a bad model for the purposes of reasoning about the system and attempting to make it better. Criticizing that model and arguments based on that model isn't based on wanting to preserve or advocate for the status quo, it's based on wanting to accurately model the world as a step towards evaluating potential improvements.
Is this just word lawyering over what "subsidize" means? I can understand how strictly speaking, rich people getting more cashback (or lower taxes) isn't exactly a "subsidy", because they're still paying more than "their share" into the system, but most people would still think the arrangement is unfair. Call it "regressive" or whatever, but I still think it's a valid complaint.
> Is this just word lawyering over what "subsidize" means?
Insofar as words have meaning, possibly. Before arguing that one group is subsidizing another, you'd first have to argue that one group is being subsidized. Leaving aside the original meanings (which only describe public funds in the first place, which this isn't), and interpreting the apparent meaning, the claim is apparently that credit cards lose money on rewards programs for rich customers, and those programs are thus subsidized, and specifically that they're subsidized by poor customers. If that were the case, they wouldn't have those rewards programs. (I'm not claiming that no company in the world has ever spent marketing money they didn't have to or spent it unwisely; I am claiming that an absurd amount of analysis has gone into the finances of rewards programs, in particular, and it is extremely unlikely that card companies are spending more to acquire a class of customers than the revenue they get from that class of customers.)
Now, more broadly, if you want to claim that credit card companies make more money from poor customers than rich customers, that would not be too surprising of a claim. (It's not obvious if the evidence supports that, and it seems like it may not be the case, but let's set that aside for a moment.) That's not a subsidy, and I wouldn't even call it "regressive", any more than I'd call a company that makes more money from rich people than poor people "progressive".
If you want to say that, in general, the practices of credit card companies and the financial industry are not fair to lower-income people, I would agree with you there. I don't think any subsidizing is going on, and I don't think rewards programs are a redistribution program; any such claim would imply taking a loss on a class of customers but keeping those customers anyway. But I absolutely would support a claim that (for instance) credit cards are predatory. Or, for instance, that airline miles programs are deliberately confusing and misleading and to a first approximation no customer "makes money" on those either.
A government might have different goals than a profit making corporation, but when it comes to revenue generation much of the principles are similar. The demand curve vs the laffer curve, or the idea of giving discounts in the hopes of increasing absolute profit (or in the case of governments, tax revenue less any government services/transfers). Therefore I'm not really sure why you can't compare rich people getting cashbacks to rich people getting tax breaks.
>Insofar as words have meaning, possibly. Before arguing that one group is subsidizing another, you'd first have to argue that one group is being subsidized. Leaving aside the original meanings (which only describe public funds in the first place, which this isn't), and interpreting the apparent meaning, the claim is apparently that credit cards lose money on rewards programs for rich customers, and those programs are thus subsidized, and specifically that they're subsidized by poor customers. If that were the case, they wouldn't have those rewards programs. (I'm not claiming that no company in the world has ever spent marketing money they didn't have to or spent it unwisely; I am claiming that an absurd amount of analysis has gone into the finances of rewards programs, in particular, and it is extremely unlikely that card companies are spending more to acquire a class of customers than the revenue they get from that class of customers.)
I'm not sure how you got the impression that the argument was ever "credit cards lose money on rewards programs for rich customers". The linked atlantic article specifically says that it's not the case:
“When you talk to rich people who pay off their balance, they think that credit-card companies are losing money on them, and they’re the ones subsidizing the people who carry a balance,” Klein explained. “It’s the exact opposite.”
In 2023, these swipe fees amounted to more than $224 billion, driving up retail prices by $1,700 a year for the average family. Everybody pays more for their goods; only fancy cardholders get juicy perks and cash returned to them.
>I don't think rewards programs are a redistribution program; any such claim would imply taking a loss on a class of customers but keeping those customers anyway
Defining "redistribution" is non-trivial, especially for businesses with high fixed costs and low marginal costs. For instance, suppose we define "redistribution" to only mean when a customer brings in less revenue than his marginal costs. That sounds reasonable, but it leads to some absurd conclusions. The most extreme example of this would be F2P games, where the vast majority of income comes from a tiny segment of the player base, "whales". The rest either spend trivial amounts or nothing at all. Given the economics of online games (high fixed costs to develop, low marginal costs per player), using the strict definition of "redistribution" above would imply the whales are not subsidizing all the other players. But this description doesn't feel correct, or at least doesn't tell the whole story. If all the whales evaporated there's no way the game would stay afloat, so it's reasonable to argue that in some sense, the whales are paying for everyone else, even if no "subsidy" (in the strictest sense) is going on.
You're not forced. This allows them to make extra money from people who don't bother, and offer discounts to price conscious people.
Time is money. Convenience too.
> to get the full value of my money.
No one is forced to understand the system, but that means leaving some indeterminate amount of money/value in the hands of the predatory airline.
If you wanna save money, you figure it out. If you don't wanna figure it out, you leave money on the table.
They're selling (negative) convenience, but that's pretty much by design.
You already have to spend time researching airlines, buying tickets in advance, etc. but now in addition to that there is a completely contrived layer of bullshit I need to know about.
You can extend this concept even further and imagine literal series of hoops that you must jump through to earn “cash back” on your ticket at the end of the flight.
If points systems caused losses then nobody would have them. They’re money makers, and that money is coming from someone’s pocket.
It sounds like you believe the losses are coming from the people who _have_ the points? That doesn't seem likely to me.
It would be a better analysis to say "it's complicated" -
* Business travelers earn personally-owned points on their company spending. In this case, the company might be paying higher prices but the individual is being incentivized to continue that because the miles are essentially a kickback.
* Personal travelers have an incentive to travel with the same airline for more points, so a kind of lock-in for either (1) those who are not as sensitive to price differences or: (2) those for whom the benefits of the points are high enough to outweigh some higher costs acquiring them.
* In the same vein, a points system that encourages a traveler to stay with the same airline can give _that airline_ greater profits from _that consumer_, even if on a per-flight basis the airline might hypothetically be making less. It's like Costco selling stuff for a cheaper unit price.
Instead I’d rather focus on human nature and induced behaviour.
When mcdonald's offers 2 burgers for the price of one, they make money because people who wouldn’t normally eat at mcdonald’s show up.
When airlines offer points, they make money because people who normally wouldn’t book flights end up booking them. Even if the points are a good deal, you end up spending more money than you normally would because you’re enticed by the points.
People just like feeling like they’re special, and they think points are a cheaper way of getting special treatment. In practice they’re not tough.
Yes and tax authorities should fix that loophole.
If you want to buy anything and just pick the first option then you probably will have worse results than someone that did research. Or someone that used coupons. Or someone that waited for a sale. Or someone that bought used. Etc etc
We obviously shouldn’t make all those behaviors illegal. There is an inherent time/money trade off in life. It’s actually the whole basis for economic activity (ie it’s why employers are able to pay you to do stuff for them) so stopping it would probably be quite bad.
The problem comes when the original seller doesn't want their price discrimination scheme to be thwarted by efficiency-improving arbitrageurs and takes measures to prevent that, because that's rent-seeking behavior and shouldn't be tolerated.
The airline wastes resources on their end, and so do the consumers. They're both doing what they're incentivized to do, but that's not what's actually efficient for society. The whole point of a good economy is that these two are always pulled into alignment (Efficient Market Hypothesis), but ours has failed in this case.
It was fascinating to chat with the software engineers at ITA Software.[0] Turns out flight routing (which everyone knows "should be" just a simple A*) is actually NP-Hard because of how convoluted the airline pricing systems are. At that company it was obviously a group of super smart people solving super hard problems..... and for what?
This is Kurt Vonnegut Jr's "Dynamic tension": muscles working against muscles, with no work being done. This is what Bullshit Jobs (good title, disappointing book) should have been written about.
To quote Eisenhower, this (lesser) scourge also
signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.
[0] https://news.ycombinator.com/item?id=29425650 or https://en.wikipedia.org/wiki/ITA_Software
Just because some people won’t buy anything that isn’t on a coupon doesn’t mean coupons are bad.
Because you can save money by getting a cheaper flight by understanding how pricing works and adapting your purchasing strategy. Many consumer are willing to spend time and effort getting a better deal.
This can be true even if the lower price is nominally a discount. Before everybody would pay $100. Now you can pay $80 by screwing around but have to pay $150 otherwise, and the screwing around is $40 worth of inconvenience. $40 is less than the $70 difference between $80 and $150, but $80 plus a $40 inconvenience is a higher cost than the original $100 uniform price, and obviously so is $150.
Which is bad for consumers and the broader economy.
For example, if Delta went under, Atlanta, Detroit and Salt Lake City would lose a total of 50%+ of their flights. That would be absolutely devastating.
If we allowed markets to become monopolized we have to deal with that when the bill comes due rather than kick the can down the road.
Since air travel was substantially more expensive then than now, the amenities gravitated to what attracted the most frequent fliers: businessmen. So stewardesses (they certainly weren't called flight attendants then) had weight limits, age limits, and if-you're-married-you-must-quit deals, and as a glance at some 1970s uniforms will show you, they were basically hiring models who happened to have the right skill set (usually at least one would be a trained nurse, and they all had to be reasonably confident) to dress them in revealing outfits. Like Hooters for travel.
If that's what you want, great. If you'd prefer other amenities... maybe not.
It has never struck me as coincidental that smoking was banned on US aircraft before no-smoking policies became nigh-universal at restaurants, but in just about the right timeframe for airplanes to shift from a boys' club to a place that catered to families.
If you want to pay more to get more, there are a lot of options, starting with coach plus (coach seats, business class legroom, priority boarding) and going through first class before branching out into niches like all-first-class flights (JSX is an airline in the US for which this is the business model; they fly smaller regional-size planes, and the reduced capacity legally allows them to skip the whole TSA and terminal experience and just let you on the plane if you show up and buy a ticket twenty minutes before departure) and then on into the various levels of chartered and truly private aviation.
You do, definitely, get what you pay for, but sometimes you don't need a Michelin-starred meal experience. And when that's the case, you've got cheaper options that didn't exist before deregulation (except for Southwest, which avoided problems by not making interstate flights at all in the early days.
It’s hardly the only fee, either.
Net profit was $6.7B meaning literally all of their net revenue (a total of 2.25% of gross revenue) was accounted for from these ancillary fees.
But their inflation-adjusted cost went down 36% since 1995.
There were a total of about 1 billion emplanements by US carriers in 2024, ish, so we're talking about a total of about $6 per passenger per year. They really are insignificant.
$70 ($35 both ways) on a $300 flight isn't that small. And again, that's not the only fee.
See also: hotels adding "resort fees".
On domestic tickets there's no YQ, YR or embedded Q surcharges anyways.
Domestic airfare in the US is down 36% adjusted for inflation since 1995. [1]
Even base tier status concentrated flying with any one carriers get you a waived checked bag, and so does pretty much any airline credit card. So basically you shouldn't pay more than $95 a year in checked baggage fees.
US airlines generally have sub-5% net margins which is why they find themselves in creditor protection every decade or so when the market turns. There's a long-running adage about investing in airlines.
[1] https://www.bts.gov/content/annual-us-domestic-average-itine...
It’s no different than clipping coupons or waiting till closing time to get pastries at a discount.
I mean, yeah, sure. Capitalism is totally stupid and wasteful and evil. Any proposals? Oh wait, no, I'm afraid I don't really want to hear any proposals on this subject. I sincerely wish we don't have to live in interesting times. (Alas, I'm afraid it's past the point we could wish that anyway, so…)
One flight will get you to your sister's wedding on time. The other won't. They don't have equivalent value, they can't be freely exchanged.