Comment by ubernostrum | Hacker News Reader

Comment by ubernostrum | Hacker News Reader

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An empty seat costs the airline more than a paid ticket.

As stated, you seem to be implying that selling a ticket for 1 cent is better than flying an empty seat. But that's not guaranteed to be true. If they put someone in that seat at a ticket cost of 1 cent, does it cost more than 1 extra cent in fuel to move the now-increased weight of the aircraft? If there's a free soda or something offered, does the extra one they serve cost more than 1 cent? Does the extra time it takes to board that passenger cost more than 1 cent? Does the sum of all of those things cost more than 1 cent?

There absolutely are circumstances in which flying the empty seat is better than selling that seat at the price the market would have borne. And we know this, because we know that airlines routinely fly planes that aren't full, instead of going to extreme lengths to auction off ever-cheaper tickets in hopes of getting someone in every seat on every flight.

(and that's without getting into the fact that not all seats, tickets, aircraft and routes are equal in terms of what they cost to operate and how much money they can make, and all the other things that go into the arcane art of airline yield management)

>airlines routinely fly planes that aren't full, instead of going to extreme lengths to auction off ever-cheaper tickets in hopes of getting someone in every seat on every flight.

Though I agree with your broader point, if airlines regularly auctioned off seats right before a flight it would encourage customers to wait until such time to make their ticket purchase. Even if the actioned seat still net them some profit, the overall effect could cause a psychological devaluation of regular tickets.

I wonder why the last-minute-inventory auction model is so popular for hotels and not for flights.

I get that not every flight is equal, but nor are hotels, yet they have systems for blind comparisons.

Some airlines do this.. like Wow.. or Ryanair. They usually start the other way with cheap first then really expensive but sometimes you can find them still at the cheap level.

i don't actually know the answer, but here's a guess. imagine you are going on a trip and you are planning your outbound flight and first night's accommodations. you suspect that the price will go down at the last minute so you put off making reservations as long as possible. which are you more willing to risk, having a place to sleep when you get there, or getting there on the day that you planned? i suspect most people are more comfortable risking a late arrival than arriving with no place to stay.

Also, people go through some pretty extreme lengths to cut costs on the traveling (airfare) part of a trip compared to the accommodations (hotel) part.

For a plane ride, people are willing to put up with zero leg room, multiple hour layovers, red eyes, zero free bags, etc. just to save a few bucks. I think it's because the plane ride is seen as a means to an end, rather than part of the actual vacation or trip, so suffering for a few hours is palatable to most people.

I’m running on the assumption that an airline only ever sells a paid ticket for at least its operational costs of that extra pax.

The 1 cent paid ticket simply doesn’t (or shouldn’t) exist.

But if the plane crashes, even the $2k last-minute 1st-class short-haul ticket will be a massive loss after all lawsuits are settled.

If the marginal expense of a seat is $200, and you paid $1000, you may sit next to a discount flyer that paid only $250. And because of that, the flight may be net-profitable instead of net-loss.

Again: airline yield management is a deep and arcane art. We get glimpses of it through their public policies and pricing, and we can guess at some things through public financial statements that disclose or let us calculate their CASM/PRASM/etc.

But the moral of the story is it's not as simple as "selling the seat is always better".

My response was to the statement that the “cheap seats” are very low margin or money losers.

The airline and first class ticket buyers needs the economy passengers just as much as vice versa.

With the existence of economy-only planes and lack of 1st-class only planes, I’d argue that the “cheap seats” are what makes aviation viable, rather than being a money-loser.

lack of 1st-class only planes

There are a few airlines that fly all-premium configurations on certain routes. Singapore does that on the Singapore-Newark route. British Airways does it on London City to New York. SAS used to on the Houston to Stavanger route.

> With the existence of economy-only planes and lack of 1st-class only planes, I’d argue that the “cheap seats” are what makes aviation viable, rather than being a money-loser.

On a typical flight, the revenue probably follows a Pareto distribution--20% of the passengers (first class) provide 80% of the revenue--but at the paper-thin margins of an airline, you still need the other 20%.

Economy-only flights are usually from economy-only carriers, which trade even thinner margins for not having to worry about the annoyances of catering to first class passengers.

Economy conditions are increasingly terrible because cost-sensitivity and easy-to-verify sources of pain (nonstop vs. layover flights) have a greater effect on consumer behavior than seat size and other creature comforts. With these conditions getting increasingly worse, economy flights become increasingly more cost-effective, and perhaps it becomes increasingly harder to keep the pampered first class passengers on the same airline or even the same plane as the economy passengers.

Also, first-class tickets aren't even at the very top of the market any more than Audi and Lexus are at the top of the automobile market. The top of the market is in charters and private jets. An airline that flies planes only for first class passengers is close enough to a charter airline that they might as well become a charter airline and bypass TSA and the other associated miseries of air travel.

Low-cost carriers have very different businesses too focused on lowering costs. The "low-cost" in the name refers to the carrier's costs, not the customers. They typically have all-economy planes and use a single aircraft model (e.g. easyJet exclusively flies the Airbus A320 family), which dramatically lowers crew and maintenance costs. They also offer little flexibility, have no interline agreements, and have no additional services (meals, etc.).

Yeah; low cost carriers are like IKEA or Walmart or (old) Amazon strategically, they deliver a known quantity at a competitive price and shave their margin out of the cost side rather than growing it on the revenue side. But they are also often low-cost for the customers, particularly the more notorious examples (e.g. Ryanair). Companies whose profitability comes from penny-pinching usually fit best with customers who are themselves penny-pinching.

(Oddly, it occurs to me that European companies do a really good job of settling in the niche of "penny-pinching to the point of being kind of terrible, but such an amazing bargain you can't complain"--IKEA, Ryanair, Aldi, Lidl. Walmart felt bad about being terrible and tried to get a little nicer to compete with Target; Amazon felt bad about being cheap and terrible and decided to chase a membership model and set up a cloud computing business on the side. Maybe it's because America has a deep inborn cultural fiction of not having social classes and companies feel embarrassed about obviously not catering to the quintessential middle class American family?)

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