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Comment by arp242 | Hacker News Reader

I once tried to book a flight with the same-day return; the price for the return flight was mad expensive. The same return flight was a few hundred euros cheaper if you booked the initial flight a day earlier.

My theory is that most same-day travel is for business, and businesses are far less price-sensitive than consumers and will just pay whatever.

I suspect this is what's going on here. Most solo travellers are for business, not consumers for holidays. The price difference here is huge – almost half – which is far beyond a bulk discount, we're talking about 1 person vs 2 people.

That's also why none of this is advertised: it's not a discount, but a "we think you can pay more, so we'll charge you more" type of thing.

Is that a good/bad/ethical/predatory thing? I don't know. Leaves kind of a bad taste for me though.

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At times it has also been common for airlines to charge lower prices for round trip tickets that extend over a Saturday. The thinking being that business travelers usually return home on Thursday or Friday and they're less price sensitive so airlines could use that as a way to discriminate. Leisure travelers typically stayed through a weekend and received lower prices.

My anecdotal experience is that this sort of discount doesn't really exist any longer. At least it isn't obvious to me when I book for the most part. Saturday night stay discounts for flights used to be very pronounced.

Just in terms of simple economics:

Without price discrimination, there is one price, and then there are two triangles "left" of the price: What consumers would have paid, but don't need to, that's the consumer surplus (between price and demand), and what producers would have sold for, but got more for, that's the producer surplus (between price and supply).

With price discrimination, what happens is that the producers "grab" some of that consumer surplus for themselves (as "price" is not a horizontal line anymore, but gets closer to the demand line).

So this is bad for consumers, good for producers. However, the producers can use the surplus to subsidize products for poorer consumers, so that a higher quantity of goods is sold.

Having said that, the airline market is very weird (oligopoly character, very perishable goods, ...)

I don’t trust that any modern company would actually “use the surplus to subsidize products for poorer consumers”, that sounds like the kind of College Economics fact that isn’t actually true in the real world.

That’s not the way to look at it. The airline has a total cost hurdle for the flight to make sense. If they don’t cover that the flight doesn’t happen. So in a very real sense, your seatmate paying half what you are could be the difference between the flight going or not. As long as they are covering the direct costs of their flight (fuel, etc.) they are helping the flight take place at all. Since the assumption is the business travelers ‘really, really want that flight’ everyone benefits here.

It’s not so much “subsidizing” as maximizing revenue by charging as much as each individual consumer is willing to pay instead of a flat price. Albeit the outcome is very similar.

It's the sort of thing that a strong regulator can mandate, but generally doesn't; and the sort of thing that an airline would promote heavily, but not in a way that anyone could rely on: "We donate tickets to Charity X who uses them to fly very sick children to world-class hospitals! Why not donate your airmiles right now, relieving us of some of this obligation without getting the usual tax deduction!"

Everyone knows airline transport is a service, not a good.

> I once tried to book a flight with the same-day return; the price for the return flight was mad expensive. The same return flight was a few hundred euros cheaper if you booked the initial flight a day earlier.

Minimum stay durations, like advance purchase restrictions, are a common part of fare construction.

> That's also why none of this is advertised: it's not a discount, but a "we think you can pay more, so we'll charge you more" type of thing.

A surcharge for X vs a discount for ~X is the same thing, it's just how it's presented.

Technically all of this is advertised, it's published in GDS. People just don't really want to read the fare rules because it's boring and a ton of reading.

I didn't know what a GDS was. Apparently it's a Global Distribution System and there's 4 major ones, including Sabre which I've heard of and 3 that I haven't.

I don't know how a normal person would have access to any of them. They're described as being offered via subscription to businesses.

https://www.bookingninjas.com/blog/gds-system-top-reasons-wh...

You can find the fares on expertflyer.com if you're curious but you can also see the fare rules usually during the checkout flow.

[edit] You can probably see them on ITA Matrix too, I can't remember.

> "we think you can pay more, so we'll charge you more" type of thing. Is that a good/bad/ethical/predatory thing?

Econ101 says it’s a bad thing because of the deadweight loss occurring versus a single market price.

It also arrogates a lot of consumer surplus to the producer (the airline), which many would argue is bad from an ethical and inequality point of view.

The only real question here is why hasn't competition driven this 'discount' away? In a perfect market it shouldn't be possible for this to exist, right? I am not a fan of airlines because, among other reasons, it often appears that demand and competition aren't driving price.

> I am not a fan of airlines because, among other reasons, it often appears that demand and competition aren't driving price.

First off airlines are an extremely low margin business.

AA's net margin is 1.26%, Delta's net margin is 5.91%, United's net margin is 6.43%, Alaska's net margin is 2.86%. These aren't exactly blockbuster SaaS numbers.

Demand and competition absolutely drive price reductions - competitive routes have much lower revenue per available seat mile - and adjusted for inflation air travel is wildly cheaper than it used to be. Since 1995 the cumulative inflation-adjusted price of domestic air travel is down almost 37%. [1] Thanks to competition you can fly from SFO to NYC for $99, non-stop, next month. On the other hand SFO to GUM is $1662 ($1100 on a half round trip basis), because there's no competition.

Airlines with both a domestic and international route network tend to lose money on their domestic routes and make up for it on their flagship international routes, but even still, they make most of their money on frequent flier programs and credit card relationships.

St Louis Fed has a good write-up on the economics of air travel. [2]

[1] https://www.bts.gov/content/annual-us-domestic-average-itine...

[2] https://www.stlouisfed.org/publications/page-one-economics/2...

Net margin does not include executive compensation and other "flexible" expenses so it only measures how profitable the business is to shareholders, not how much cheaper it could be in a free market.

It doesn’t seem to be that widespread - mostly being confined to short one way trips. There is no evidence of it happening on international or return flights.

It feels more like a test of a strategy to fill middle seats.

> Is that a good/bad/ethical/predatory thing?

It is a natural result of our economic system. Economists call it "extracting consumer surplus," and there are several mechanisms companies employ to get the population to pay them the maximum amount of money. Airlines indeed use the information they have about you and the flight you're booking to guess the maximum amount you'll pay- and that's the price they show you.

Obviously we, as consumers, feel taken advantage of because we wish we could pay less (and keep the surplus to ourselves). But this is going to happen in any capitalist system.

> Is that a good/bad/ethical/predatory thing? I don't know. Leaves kind of a bad taste for me though.

It can be an equitable thing as families traveling usually have less income per head than individuals.

Some companies more or less do the same thing with their "enterprise" software.

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