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Sorry for doubling up on aviation videos! Normally I wouldn’t do two videos of similar topics back-to-back but the video I was going to do just ended up not being interesting enough so I scrapped the script. I didn’t have time at that point to do a research-intensive video so I decided to do this topic that I already knew a good bit about.
Also I know this is a pretty loose interpretation of economics, but hey, I liked the title.
Also, one clarification on something I realized might be confusing during editing: airlines absolutely had first class in the 60s and 70s. It just wasn’t anything like the long-haul first class’ you see today. It was pretty much like domestic US first class today. The impact of the Concorde was the perceived competition it created for the highest-class of traveller. Some airlines decided to close their first class cabins and not compete while others improved their cabins in order to compete. Lie-flat seats or even angle-flat seats really didn’t become ubiquitous until the last 10-15 years with the demise of the Concorde.
You should have done more research on how FARE classes work, which is a whole separate thing from busines/economy class, as the economics you have described isn't accurate without this consideration. I can buy a ticket on the same day, for the exact same flight as my neighbour, but pay a very different fare than my neighbours next to me. To simplify, an airline will sell 7 seats for, say, $200, once those sell out, they'll sell another 7seats for $230, the next seven for $270, and so on. There are also algorithms used to automatically change ticket prices based on demand, or holidays, and time between date of purchase to date of departure.
this is a very good effort, but there are some inaccuracies. In the 70s I used to travel transatlantic 6 times a year. My parents always bought standby tickets on the Miami-London flight as this was the cheapest option. Of course, because we were very friendly with the manager at check-in we always got seats. Also because my father did a lot of freight business with the airline we had access to the first class lounge and did, on a couple of occasions, travel first class. In those days the upper deck on the 747 was a first class lounge with a big lozenge shaped sofa in the middle of the aisle and sofas along the sides with a sit-down bar next to the door to the cockpit.
But there are different bookong classes in each cabin class too. So there are maybe 5 different prices just for economy class. Than you have different fare bases so you can't say the there is one price for one cabin class.
The first point about Concorde needs to be corrected. It was a making a loss on an operational front due to the oil crises which pushed up fuel costs just as Concorde was being launched. Secondly, the noise meant that over-land flights could not go ahead so they never got any economy of scale in production and maintenance. Separately, the R&D was paid for by UK & France tax payers, not the usual investment by a Boeing, etc. so the cost of the plane never had to be accounted for, otherwise it would have been even more expensive.
Airfares were priced at a premium over standard tickets, but BA realised that the travelers had no idea how much the ticket cost as it was booked by their secretary: tickets were $5k but the passengers thought it was $10k, so BA put the price up and then started to make money.
Later in the life of Concorde, there were special offers, such as London - New York for $3,000 (one-way Concorde, return on 747) which were used to fill empty seats.
This proves there's way to many poeple with expendable cash on hand! Who is purchasing these $8000 tickets ? The BUISNESS class is BULLSHEET! Make me shut off my phone and they get 3 computers to play with! Screw air travel !
How can you say that concorde "failed?" It was in service as a supersonic airliner for 27 years. A fairly damning and broad sweeping indictment. The bottom line is that you can't draw a direct comparison between subsonic and supersonic airliners. They are mutually exclusive classifications. As speed increases, cost increases exponentially.
You leave out the greed factor. You leave out that the little people pay more taxes that subsidize the airlines even to this day. You also fail to mention the overall cost of flying a plane in general minus subsidy. IF if were actually so expensive, then each flight per airline would enlarge the first class section. BUT they cannot. Why? Because there isn’t enough people who can afford their overly inflated first class and business class pricing. Business class is a farce. Charging whatever you want bc the customer doesn’t pay for it and the job they work for does is greedy. At the end of the day it’s the little people who fly. And without those little people and lower fares the airline would go bankrupt. Period. So tell us an actual cost per flight and redo the math. Because it’s the little people paying out those million dollar bonuses to ceos. Without us, there wouldn’t be nearly as many airlines and certainly NOT as many regular routes. Rich people don’t pay enough overall for airlines to stay in business. Not anywhere near enough.
Beautiful presentation, thank you! My wife and I are going to Beijing next week on Hainan Airlines, they have wonderful amenities and are definitely set up for long distance flights, even standard fare seating is like business class on any domestic airline here in the states.
If we're flying from let's say...Atlanta to Miami and you're in first class and I'm in economy who's going to get there first? I would stand up on plane like on the train if the tickets were even cheaper. Just get me to my destination in one piece.
Does not explain WHY tickets are so high, and WHY all the amenities that the Airlines used to have and give have gone away; until you are basically flying in a cattle car. It also does not explain WHY it is cheaper to fly to Europe from the US than it is to fly ACROSS the US. Basically, it boils down to the almighty dollar as usual. What truly makes me wonder about all airlines, when they complain to Congress about the high cost of fuel and yet THEY create a lot of the problems they are complaining about. The last time I checked and went to school; the shortest route was a STRAIGHT LINE. WHY do the airlines have such convoluted routes? WHY do they have HUBS? Why do some airlines fly to the EAST to simply go back to the West AFTER they reach their HUB? Sometimes regulations do make a lot of sense, especially when an industry is ignoring common sense, just so they can make all the money possible.
yeah... but then the reminder of how I hate that boarding time right after the 'business" was put on first. Then you get to walk by the pretentious group to your crammed seat... all the while you are reminded how you got to pay for their seat (bailouts, taxes for business subsides, and they fly free since company pays fee), AND... you get to pay for your ticket too!
hello there! i'll make a long story short, but this is really important . airlines, except for low cost ones, transport goods as well as people and some routings are more valuable than other ones of course. i can say so because i worked for some international freight forwarders doing only air freights most of the time. anyway since the 80' approx. shipping by air freight keeps growing a lot. see the IATA records if you have some spare time and nowadays 50% of the loading capacity for any medium/long haul aircraft is reserved to goods of every kind. still, please keep in mind there are a lot of full cargo airlines and a lot of major airlines got their own full cargo aircraft in their fleet, Air France, BA, Lufthansa, Qatar, Etihad... on the other hand UA, AA and Delta got only passenger flights. hope this can help you in order to get deeper in this matter!
My company sent me from Indy to Dusseldorf Germany via Northwest (no longer around) It was my first transatlantic flight, my first business class flight, and my first 747 flight. This was in the mid nineties and the cost round trip was $7800. That included the hop from Indy to Chicago and the hop from Amsterdam to Dusseldorf. The best part about Dusseldorf? The fact that it's only a few hours to Amsterdam (my favorite city on earth) and I was there for 10 weeks straight. Ah...Amsterdam....
Your model assumes seats are at 100% occupancy for all classes. The is far from the fact. Fact is premium economy and business classes are often rather empty. Its usually the first class that's pulling most of the weight.
Gotta love how everybody bitching about “1 percenters” as stuck up assholes but really they just jealous. If u have the money and r willing to spend it frivolously then go for it it’s not our place to judge people more fortunate than ourselves. Economy class isn’t an insult and neither is first or business as they all have the same goal. To go from point A to point B
The Concorde failed because US airlines did not have anything that even came close to it, as a result, the US government came up w the biggest corporate bull shit ever - stating that the Concorde was forbidden from flying anywhere close to sonic over US territory. The Concorde was designed w mostly Europe -UU and US-US flights in mind. US gov claimed that the sonic boom was too upseting to people on the ground (mind you every single one of your US air force bases scattered all over US territory and filled w sonic jet fighters for whatever reason (ehm, bs) were not opsetting even though they make way more noise. With this, the Concordes range and usefulness was shattered since it destroyed about half the routes it was designed for - for example, Paris-LA, London-LA, LA-NYC, LA-Miami, etc etc. The Concorde would have not have failed if US airlines would have put up, shut up, and competed w their own - that didnt happen, so US gov did the anticompetitive, anticapitalist thing and uttery destroyed the Concorde. So thanks those disgusting airlines that treat us all like were filth, like animals and make us endure flights that could be done in half the time. Thanks - thanks a lot.
(*I work for AL marketing*) This video couldn’t be more wrong. Learn about yield management, load maximization, nested classes fare, etc, and do your video again. For example the price of any seat is constantly re-aligned to the offer/demand balance. In a flight it’s not rare have economy seat that were sold more expensive than premium or even business seat. Generally speaking premium seat are more profitable, but the math on the overall premium section vs economy section is wrong, bringing you to imaginary conclusions...
I know. But the general point of video that airlines benefit only from premium seats and should focus on those customers is completely untrue and misguiding, the basic theory there and the math are wrong. Especially lately that traffic development is mainly captured by LCC.
The price difference between ecomomy and business/first is huge... I got me economy ticket from the UK to Japan for about £600 on Etihad, while the business class seats were over £2000 when I was booking...
You should not talk about revenue per square foot. You should talk about profit per square foot and calculate the several profits with different costs as first class service causes significantly more costs than economy class.
Quality of the analysis lacks therefore
If economy was just there to fill up the plane, airlines would simply switch to purchasing smaller planes, to accommodate a smaller business'. The mix serves a purpose: achieve a commercial equilibrium within the confined space of a cabin. By diversifying their clientele, airlines maximize their gains, leveling off potential losses that would arise from a dependence on a single consumer group. If not enough business travelers show up to pay for gas, then coach will - and vice-versa.
I think you have a miscalculation for the prices. IMO the business class price is about 3,1x price of economy, premium economy is like 1,6x price of economy. All of these, considering business class and first class is often quite empty, plus airline has to provide premium lounge and all other premium services. Would these figures change your story, that economy class is the main money generating machine for all airline?
Essentially the airlines figured out what made more money. And that's what they stick with. Economy class_seems to be the way to go. To bad super sonic flight wasn't that profitable. As a mechanic once told me, " speed & power are a matter of money. How much are you willing to pay? "
Its not uncommon for flights to take off having plenty of empty bussiness class and first class seats. However no flight would ever take off unless they have filled all of their economic class seats. The vast majority of the money the industry makes is from the mass consumerism of flights. If airlines didnt have this reliable income, they would have to close down.
Flying is terrible. There is nothing luxurious about it, even in Business or First class, with the exception of some foreign airlines. Nearly everyone can afford to fly, hence why nearly every flight is fully booked. This tells me that the demand is higher than supply, yet airlines haven't really raised prices. I bet if all the airlines raised prices by 25%, brought a bit of luxury back to flying (done by removing some of the seats, better service and food that has taste), they would still fill every seat, have happier customers and make even more profit.
It shouldn't be less expensive to fly than it would be to drive (also factoring in time value). I'm most cases, it is.
Like I said, with the exception of some airlines. All the domestic business class is not great. Yes, you get fully lay down seats and a several course menu. The food is still mediocre and the seat is only OK. Nothing amazing.
Back in the 50's my grandparents used to go camping in France and take their car on the plane. But one year their flight was over booked and the airline literally gave them their own plane to get to France.
Statistically you're more likely to survive a crash in the rear and you're more likely to survive a crash then you are to die (well maybe thats because there are more people in the back??).
Its still no consolation to those that have died and WILL die, you cant "half die" when your 500mph tin can plows into the side of a mountain or into the ocean, you're dead, end of, and you paid for it.
Can someone explain why the direct from London to Washington costs more than a flight that starts from Stockholm and connects to London? It's less fuel for the airline if the customer starts from London, no? Or am I being an idiot lol
This video kinda misses the facts on percentage of seats filled while flying and assumes 100% occupancy...
Are you sure of that ?
Is there huge demand for business or first class that fills all its seats ?
Maybe if you look at %of seats occupied in flights you could explain why majority airlines do not have first or business class.
Anyways, Have a nice day...
In hindsight, we can see that people generally learn very slowly. How could we fail to see that the Concorde could not succeed saving people 90 minutes when they had already written off the better part of their day to get to London or Paris? Or that people would not relish sitting in the Concorde’s spartan, narrow fuselage, awash in jet fuel and continuously inducing a shock wave? Similarly, it is clear now that a business class seat is an airline seat, and nothing more. An economy seat is a humiliating torture device for people who, in reality, probably cannot afford to fly. A first class seat is a bit too pompous and wasteful, not much better than business class, and sometimes a bit worse. So even if we fail to see it now, that which we today call “business class,” will before long be called ordinary airliner seating.
3:58 From a DC guy that knows both airports, that video is at Reagan National, not Washington Dulles. Dulles is well to the west of DC, in Loudon County, VA (well, a small amount of one of the runways is in Fairfax County, VA).
Issue 1: 0:35 False - Airlines Make money on ALL SEATS and if it was not a good Business model, they wouldn't have only Business Class Seats.
Issue 2: 2:46 Changing the Rules of the Game midway though.
one more thing. you said economy is there to just fill up seats. if that's the case, why even do it? you misrepresented it. airlines are using economy to pay for fuel. they make enough on economy to pay for the expenses related to the flight but do not make profit. profit is made from a portion of the revenue from other classes. This video also doesn't take into account the massive effect of upgrades. cheers.
a few mistakes. first of all. it's not just about square footage, it's about weight. fuel is important. the weight of the passengers in first class in tiny compared to the other classes. yet they pay more. the fuel required to move first class is also tiny compared to the fuel required to move economy or business class. thus, they are making money in first class hand over foot.
Working worldwide in engineering efforts, I can say I flew over 100-million miles in the past 35+ years...that said, I was only 'bumped' to 1st Class twice in that time, and only traveled 'business class' once. This video, at the end, is correct - that there is basically NO DIFFERENCE in most business-vs-1st class seats, but saying that, understand one thing - there are FEW who ever fly business class that aren't executive management or independently rich, either. Therefore, Business Class IS First Class...and the airlines are FINALLY catching on, that they have two sections, where in fact, they only need one. As for the rest on the aircraft...wake up, it's just a 'cattle car' to get you somewhere that, within continent, you would probably got there in the same amount of time for less money if you had simply drove, or took the train. Flight just isn't worth the hassle anymore...take your time and actually travel, or stay at home and video conference...it really is that simple!
I'm not convinced by these figures. For example, income is more than just ticket prices. There is also income from things like in-flight duty free or food sales. For example, business class travellers are typically frequent fliers so are less likely to go for any of the special souvenirs. I regularly fly between Zurich and Alicante by Swiss or alternatively Basel and Alicante by Easyjet. On Swiss they give me a drink and a small sandwich for free. I cannot get more, even if I offer to pay for it. On Easyjet I need to pay for all food but there are about 20 pages in the in-flight magazine of food choices I can chose from. I typically spend about 10 CHF for which I get three items: a drink, something hot and something cold. And I won't be hungry for another couple of hours. My estimate is that every second person will buy something. On a flight with say 180 seats, that is 90 people buying something or almost 1000 CHF of revenue. That probably covers all the costs of staffing plus more. I never buy duty free stuff but other people do. Lots of cigarettes, upmarket alcohol and whatnot sold. Probably revenue for that is higher than for food. But again, business travellers are probably not interested. There is only so much whisky or tobacco you can bring home. This is why Easyjet doesn't do business class. Business class passengers occupy more floor space and spend less on food and duty free.
When I fly Swiss, I will buy that something in the airport as I know I cannot survive on their miniature sandwich alone. So Easyjet is abstracting from the income of airport food outlets. I don't know if airports have understood that yet or are upping charges to compensate. Because Easyjet has been giving Swiss a real battering on that route, Swiss fares are down to about Easyjet level for economy. This leads me to think that Swiss must be losing money on that route. Same fare, fewer seats, less secondary income. Easyjet also offers SB so people can bypass queues and enjoy business-class style perks within the airport. But once on the plane, all passengers are equal. I think that is also eating into Swiss' business sector, as to be honest, on a short haul flight likethat, business class isn't worth writing home about. Much as I appreciate the style and comfort that Swiss offers, espacially at such low fares, my feeling is that this type of luxury is on borrowed time.
Completely inaccurate analysis. Business and First Class are way more costly for the airline than Economy, not to mention that they are never fully booked. Heavier seats, more space, more luggage, more personal (on and on the ground), Business and First Class Lounges on the ground, more and more expensive food e.t.c.
The concorde failed spectaculously? Let's talk about McDonnell Dougles. In my opinion shorter flights are better than more comfort. The only reason many people, me included, pay for higher classes on commercial flights, are the insanely long travelling times.
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