Shostack + Friends Blog Archive


Why Is Air Travel So Cheap?

The cost of last minute ticket doesn’t seem to be enough for airlines to break even.

How much of this is due to a lingering fear of flying? How much of it is the extra cost to travelers, in inconvenience and hassle, of being bit players on the security stage?

As long as a carrier is flying a route, it makes sense to fill as many seats as possible, even for $5, because the airline has high fixed costs, and low marginal costs. (Assuming that they don’t bring up new gate personnel or flight crew for a busy flight. If they do, then the bottom price for a ticket is higher.) Now, they don’t want to sell $5 tickets because if they do, then no one will pay $200 for the ticket. It’s framing effects. But costs are clearly too low, long term, for airlines to survive.

But I’m curious. Does our color-coded alert system, people pawing through bags, and all the rest of it has a measurable economic impact?

One comment on "Why Is Air Travel So Cheap?"

  • Justin says:

    Hey Adam —
    I’d say, of course, as a matter of economics. If you expect 3 hours of dawdling around the airport in security queues instead of 1, that has a great effect on your scheduling — and simply driving instead of taking short-hop flights becomes a lot more attractive.
    Plus isn’t there a post-9/11 security surcharge on ticket prices now?

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