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Discussion: (55 comments)

  1. morganovich

    well, don’t we need to apply some quality adjustments here too?

    seats are smaller. a 10% drop in legroom is no joke and ought to easily add 10-20% to the quality adjusted cost. you do not get a meal in coach any more. entertainment is no longer free. lines at airports are considerably longer and less convenient. (this may not be the airline’s fault, but it sure affects the experience and therefore the value).

    why just look at baggage fees?

    places even fly slower now than they used to making the trips take longer. this may only be 2-3%, but that makes a difference too.

    as a baseline, let’s look at “economy +” seats that offer the 33-34″ pitch that seats used to have.

    “Sample Price: The base economy fare between Boston and Los Angeles is $338 round-trip; Economy Plus adds $79 each way.”

    that’s a 46% price hike to get the legroom of 1980 and you are still not getting fed or a free movie.

    Sample Price: The base economy fare between New York and Seattle is $360 round-trip; Economy Comfort adds $79 each way.

    etc.

    http://travel.yahoo.com/ideas/best-airlines-for-extra-legroom-in-coach.html?page=all

    if we add in bags, a meal, a free movie, factor in the 2-3% slower flight time and the extra hassle at the airport, well, i think the slope of this chart looks very different.

    the quality adjusted price looks like it would be about $200 higher using quite conservative assumptions which means we have really pretty much gone nowhere since the early 80′s.

    price is down, but it’s because you traded down from a mercedes to a kia, not because the same amenities got cheaper.

    this is also not a great metric to use as the big shift toward longer flights is having a big effect on $/mile.

    flights get cheaper per mile as they get longer.

    this is due to gate fees and basic costs a plane faces every time it takes off and lands. this becomes a mix shift issue and it gets tangled up with overall price moves.

    also:

    using CPI adjusted pricing here is not necessarily valid.

    it just shows that other prices rose more. that says nothing about absolute affordability, just relative affordability.

    eg if income was flat and cpi was up 10% and air travel up 5% then on a cpi adjusted basis, air travel would look like it was getting more affordable but in reality, it would be less so relative to income.

    1. To adjust for quality, we would also have to factor in the increased safety when flying today, which increases the value to air travellers.

      Also, many regional airports have expanded significantly, increasing the number of overall flights available, and increasing the convenience for many fliers.

      One example that I am familiar with is Flint Bishop Airplort, which has expanded in size by a factor of 2-3 times over the last 15 years, in terms of the size of the airport and the number of flights. From a medium-sized airport in SE Michigan, you can now get direct flights to Minneapolis, Orlando, Baltimore, Chicago, Cleveland, Tampa, Las Vegas, Atlanta, Ft. Myers, etc. In the past, that many direct flights from a regional airport would not have been available, and passengers would have had to drive an extra 50-100 miles to Detroit, so I think we would have to factor in the added convenience of an increase in direct flights from regional airports.

      As far as “free food” that was only ever available because of regulated airfares by the government (airlines couldn’t compete on price, so they competed on service), but some still feel “entitled” to what only a byproduct of government regulation of prices.

      We can also do price comparisons much more easily today on the Internet, and don’t have to call or visit a travel agent to book tickets.

      And of course for frequent travellers, there are many benefits that aren’t captured in ticket prices, and some of those benefits might be greater today than 25 years ago (early boarding, first class upgrades, no baggage fees, exit row seating for extra leg room, free tickets with miles, etc.).

      1. juandos

        to factor in the increased safety when flying today“…

        Not a minor detail….

        36 years as an airline employee I’ve seen what I consider tremendous leaps reliability in jet engines and cockpit electronics…

        This not only means safer flights but a reduction in FAA mandated maintenance procedures…

        Modern cockpit electronics help reduce fuel expenditures due to more efficient air routes…

        All this is in turn leads to a reduction in operating costs…

        I don’t know what part these evolving technology standards play in price reduction of flight fares but I’m guessing its substantial…

      2. morganovich

        that answer seems wrong in a great many respects.

        more choice of flights is not a quality adjustment for a product. it’s just an availability issue. more stores sell more types of onions too, that does not increase their quality, only their variety. that6 fact that i have more onions to chose from does not make any of the onions more affordable. the point you are making about variety does not bear on affordability. sure, more flights could be argued to increase quality of life, but it says absolutely nothing about affordability.

        this same thing is true of things like e-tickets. the fact that i can now buy a book online instead of going to a store is not a quality adjustment in terms of the price level and, honestly, it does not really save me much time using travelocity now as opposed to calling the amex travel agent in the early 90′s. even now, i often is a travel agent as it’s just easier and they usually get better prices, especially at busy times of year and for last minute tickets. others may disagree, but from my experience, you simply cannot beat a good travel professional.

        and travelers now need far more miles for upgrades and to buy tickets. rewards have dropped, not risen. we have invested in a company that does reward program management, so i happen to know a great deal about that. that’s a drag, not a benefit. a mile is not worth anyhting like what it used to be.

        we can wrangle subjectively here and never get anywhere, so let’s look at what we can actually demonstrate:

        if we just boil this down to one simple issue though, this whole chart changed massively.

        you used to buy a coach seat with 34″ of legroom/ now you get 30-31″.

        we do not need to guess how much people value that as such seats can currently be purchased at a premium that looks like about 45%.

        this is hard data to do an apples to almost apples comparison. if we add in bag costs and a meal, then we can get at actual apples to apples without including anything at all that is subjective.

        if we take $360 multiply by the seat premium of 45% we get $522, we then add the $30 in bag charges and $10 for food and get $562, a number that looks just like the early 80′s. thus, just comparing like to like, we see no real price move and do not need to resort to anyhting subjective to show it.

        to buy a seat that was the same size as one from 1980 and check bags and eat like you did then, the price is pretty much identical in constant dollars.

        1. Its Gsatt

          If one is trying to live it large on a 3-4 hour flight then its cool to pay that much more. The majority of people just want to get to florida without spending 20hrs in a car, forking out the gas, and staying a night in a hotel if they cant drive straight through. That 4 hour flight is the luxury in and of itself. You can’t forget that. It’s 20 hrs in a car, longer on a train, and days on a bus to travel 1300 miles. I have no idea what it is by horse and buggy

          1. morganovich

            but that’s not the same thing gsatt.

            we are trying to compare like to like here.

            it’s a double standard. you can;t talk about how this years chevy is better than last because they added 2 speakers to the stereo and agree to factor that into cpi then ignore that this year’s airplane seat is considerably smaller than that of 1980 particularly when we have a very clear, market driven sense of what the difference in value is as shown by how much more people are willing to pay for seats the size of the old ones.

            people could fly to florida in 1980 too. it’s not like the 80′s required the use of a connestoga wagon to get there.

            and you could board faster and with less hassle, pack liquids of reasonable size in your carry on, get free baggage check, get a free meal, be more likely to get an empty seat next to you, and actually fly faster as planes fly slower now.

            planes may be safer, but they are also not on time as frequently (though the figures get trick to look at in the last couple years as airlines responded to increased penalties for being late by adding duration to the scheduled flights to pad it)

            but we get into some real subjective territory here with a lot of this. how do we value being ob time vs waiting in line vs safety especially when planes were already very safe. going from a .000000001 chance of crashing to a .0000000009 chance might be a 10% drop in risk, but is hardly noticeable to the average consumer and might influence no behavior at all while an hour in line is somehting you notice, but these things are not really comparable in units and i’m trying to stay out of that.

            if a burger used to be 10 oz and is now 6, just saying that it is cheaper does not tell the whole story, yes?

            so when a seat shrinks, that is not the same story either. give a costless choice, everyone would rather have a bigger seat. it’s a better product. if you pay the same for less product, you are still paying more.

          2. Its Gsatt

            Yes but the 2 speakers in the Chevy is exactly what you are comparing. Chevy used to tout that they had more leg space in their rear cab than Ford. You are saying the fares cant compare over a few inches of wiggle room. I completely understand that it is not as luxurious anymore, but it does not have that nostalgic feeling it once had that was championed. Its the norm now, pretty soon it will be an entitlement. What has changed now is undoubtedly the amount of people that now have access to stepping onto a plane and being across the country in a matter of hours. They may be packed in like sardines, but they are still flying.

          3. Its Gsatt

            And the airlines are more on time than ever

            http://www.cbsnews.com/8301-201_162-57490246/airlines-show-timeliness-baggage-improvements/

            Thats only the first link in google. Technology causes much more accurate predictions of weather and the ability to easily route around the worst of it if possible. There will always be those delays and cancelations that are unavoidable, but with the FAA slapping huge fines on tarmac delays over 3 hours you can bet the thrifty airlines will avoid those as much as possible.

          4. morganovich

            a couple of of points:

            1. the on time performance is not an apples to apples comparison. faced with new fines for being late, airlines padded their schedules and added expected time to their flights. flights that used to claim 5 hrs 30 of fly time now claim 6 hours 15. this is not planes arriving earlier, it’s the standard being changed. cancellations are also more common.

            2. j dewey, no, it’s not. if i offer a new sandwich at mcdonalds, that is not a quality adjustment for the big mac. it may be an improvement in variety of food, bu it says nothing about the quality of a big mac. by your logic, i could make a big mac smaller but call it the same quality because i added mcrib. does having a soda available at the corner store instead of at the more distant grocery store increase the quality of the soda? no. you are confusing 2 completely separate issues.

            but again, this is all subjective wrangling and we are not going to get anywhere arguing about the relative values of safety vs prettier stewardesses vs long waits and on time performance.

            i think we need to stick to the thinks we can directly quantify.

            seats are smaller.

            you do not get a meal.

            you get charged for bags.

            these are all changes in service to which we can attribute specific market determined prices.

            larger seats are available. they cost more. clearly, this is because people value them more highly.

            this is not some methodology i made up, this is how CPI works. it reduces the price of a car when that car gets more features. to use it as a comparator for airlines and then not include the fact the airline seats are smaller is a double standard.

            if a car stopped having a stereo, that would, according to CPI, increase it’s price due to a negative quality adjustment. airline seats work the same way and we do not need to guess by how much to adjust the number as there is a market price for it.

            there is also a market price for a meal on a plane and for baggage fees. when we add them all together, we get a price that looks exactly like the early 80′s in real terms.

            thus, the real price of the same seat you used to have is about the same.

            it’s not a valid comparison to take a quality adjusted CPI and compare it to a non quality adjusted airline seat.

            you need to pick one side of the street and live on it, not use whichever suits your narrative.

          5. Its Gsatt

            I definitely agree that we can get way off track on this. After all it is a very volatile industry. I do agree that if you put the quality of services into the equation it will not be significantly different. However you also must admit that people were not given the choice to scrap the roomier seats and meals back in the “golden age” of flight to save a few bucks.

            I was not born at the time so I’m also trusting your word about the luxuries and attractive stewardess :)

          6. Its Gsatt

            Nope, I’m going back on that agreement. The little frills should NOT count towards the argument that its cheaper than ever to fly. All the food and frills are to compete for customers. Bottom line is the cost of that ticket price to go from A to B. To put in the leg room is to write off the whole business model and existance of Low cost Carriers, the largest being South West Airlines.

          7. morganovich

            gsatt-

            “Bottom line is the cost of that ticket price to go from A to B. To put in the leg room is to write off the whole business model and existance of Low cost Carriers, the largest being South West Airlines.”

            well then you cannot use cpi as a compator, can you? CPi takes out “all the little frills” from the price of products. if those frills go away, price has to go back up.

            mark’s methodology is internally inconsistent.

            you are mistaking selection for inflation.

            if ford releases a new econo model that is cheaper, yes, that may mean that more people can afford to buy a car. but that is NOT disinflation. price level comparison must compare like to like.

            paying less for lower quality is not the same as prices dropping.

          8. Its Gsatt

            Very true, however we can’t compare any consumer commodities if you want to trump with that card.

            I understand where you are coming from. I found some pictures of some 1970′s stewardess’s. Fantastic.

            Those luxuries were artificially made possible by government regulation that allowed them to keep their ticket revenues high enough above the cost of flying those planes that they could blow some cash on meals (that I’m guessing rivaled Big Boy) and a few less rows. And hot chicks.

            I’m trying to find the average cost of Southwests airfares. Their business model has been to provide cheap low cost travel. That was their niche, undercut the competition. And they existed before,during, and after deregulation. Granted their prices will still be affected by it, at least you cant say they had awesome legroom back in coach.

          9. Its Gsatt

            I tap, I’m gonna get fired looking for Southwests average. If your qualm is with the CPi average and quality computation then I missed the turn. I assumed the post was a simple comparison of how much a customer pays today vs. 30 years ago.

        2. John Dewey

          morganovich: “more choice of flights is not a quality adjustment for a product.”

          Of course it is! It is exactly a quality improvement.

          morganovich: “the fact that i can now buy a book online instead of going to a store is not a quality adjustment ”

          Of course it is!

          Perhaps you have a different understanding than the rest of us of what the word “quality” means.

          1. juandos

            Perhaps you have a different understanding than the rest of us of what the word “quality” means“…

            Hmmm, does having a few more ways to acquire a good or service iimprove the quality of that product or service?

            I think its two seperate things at play here…

          2. John Dewey

            I think you misunderstand, juandos. The service being provided includes not just the environment onboard the aircraft but also the convenience afforded to the customer. One measure of convenience – frequency of flights – is definitely a quality characteristic. When an airline increases the number of flights in order to more meet the desires of its potential customers, it has definitely improved the quality of its service offerring.

          3. juandos

            When an airline increases the number of flights in order to more meet the desires of its potential customers, it has definitely improved the quality of its service offerring“…

            Hmmm, I think the 36 years in the airline business has left me more than a bit jaded…

            I guess you’re right regarding frequency and the enhanciement of the product or service quality but…

          4. John Dewey

            Here’s a link to a 1990 paper by professors from Gonzaga University and Michigan State University which explains how deregulation coincided with an important improvement in airline service quality: an increase in frequency of flights.

            Flight frequency is definitely considered by my industry to be a characteristic of quality.

            http://www.bath.ac.uk/e-journals/jtep/pdf/Volume_XX1V_No_1_35-47.pdf

          5. John Dewey

            juandos: “I think the 36 years in the airline business has left me more than a bit jaded…”

            Certainly the past three decades have been very difficult for many airline employees – those who endured pay cuts and those who lost jobs. Shareholders of all the legacy carriers and most of the startups have lost billions in wealth.

            The villain in this story is not deregulation. Rather, it is the government control of the industry over five decades. Had the free market been allowed to work from the industry’s beginning, the pain sufferred by employees and by shareholders would have been minimized. Most of the many dozens of airlines which emerged would have failed. But none would have become the inefficient giants which had to be slowly and painfully unwound after deregulation.

          6. morganovich

            um, no, it’s not. it may be an improvement in quality if life, but that is not a quality adjustment for the purposes of inflation.

            you are mistaking selection with price. let’s take a very simple example, a big mac.

            if a big mac today is 20% smaller than 20 years ago, then that would be a quality adjustment for the product.

            that is how i define it, how the BLS defines it, and how every economist i know defines it.

            if mcdonalds adds mcrib tot he menu, this may make your life better by offering you more choice, but it has ZERO effect on the quality of a big mac.

            if a new mcdonalds opens closer to your office, that may also make your life easier. but it still does NOTHING to increase the quality of a big mac.

            i think you need to go read the BLS page on how quality adjustments work. you seem to be under some profound misconceptions as to what the conventional definition is.

            the one you are trying to pass off is simply wrong. it completely misses the point of the issue i am raising and sets up an absurd standard that far from “everyone” using, no one in economics actually uses.

            the BLS does not decrease the price of a ford because a new dealer opens closer to you.

            i do not think you understand what “price level” means.

          7. John Dewey

            morganovich: ” mcdonalds adds mcrib tot he menu, this may make your life better by offering you more choice, but it has ZERO effect on the quality of a big mac. ”

            In that particular case, we would not be referring to the quality of the Big Mac. What is analagous to the quality of passenger air service would be the quality of restaurant experience at McDonald’s. Adding items to the menu at McDonald’s is an increase in the quality of the dining experience at McDonald’s. And every economist worth his salt would acknowledge that.

          8. John Dewey

            morganovich: “if a new mcdonalds opens closer to your office, that may also make your life easier. but it still does NOTHING to increase the quality of a big mac.”

            Again, you are using an example which is not analagous to the argument provided by Professor Perry.

            When McDonald’s opens restaurants closer to office buildings, the quality of the McDonald’s restaurant chain has increased. Accessibility of a product – whether that be increases freuquency or greater geographic coverage of a market – is most definitely a characteristic of quality.

            As Seth implied, you are using a very narrow engineering definition of product quality rather than the definition of quality used by economists and marketers.

          9. John Dewey

            I’m not exactly sure what you are arguing, Ron.

            At this point, I’m not sure either, John. :)

            I think both burgers are food service products. But they have different degrees of service quality. If McDonald’s offers its burgers from one location in Dallas, it is offerring a food service product. If McDonald’s offers its burgers from 100 locations in Dallas, it is still offerring a food service product. The quality of the physical food item may be the same. But the quality of service offerred by McDonald’s has sharply increased.

            Would you say the quality of service offered had increased if those 100 burger locations were 100 different firms? Assuming, of course, the burgers are identical.

        3. “more choice of flights is not a quality adjustment for a product. it’s just an availability issue.”

          I think you are confusing a psuedo-manufacturing definition of quality for the economic definition.

          Economic: “That characteristic of a product or service that satisfies the customer’s wants and needs in exchange for monetary considerations.”

          1. morganovich

            no, you are just missing the point.

            when one speaks of price level, you do so by comparing like to like.

            by your logic, the price of a burger drops because mcdonalds opens nearer to you.

            that’s just not the case.

            it may make your life easier, but that is not the same as the price level for burgers dropping.

          2. The price may not change, but what I get for the price does, as you indicated, by making my life easier. I’m getting more for my money, now.

            Comparing the price of a Micky D’s burger that is 6 miles away to the price of a burger 2 miles away is not a like-to-like comparison unless you live in an overly simplified universe, which we do not. At least, not to us.

          3. Comparing the price of a Micky D’s burger that is 6 miles away to the price of a burger 2 miles away is not a like-to-like comparison unless you live in an overly simplified universe, which we do not. At least, not to us.

            But that’s not a quality difference. The burger 6 miles away can be considered a different product from the one 2 miles away due to the higher cost of acquiring it.

            One bird in the hand is equal in value to one bird in the bush plus shipping.

          4. John Dewey

            Ron H:”The burger 6 miles away can be considered a different product from the one 2 miles away due to the higher cost of acquiring it.”

            I’m not exactly sure what you are arguing, Ron. I think both burgers are food service products. But they have different degrees of service quality. If McDonald’s offers its burgers from one location in Dallas, it is offerring a food service product. If McDonald’s offers its burgers from 100 locations in Dallas, it is still offerring a food service product. The quality of the physical food item may be the same. But the quality of service offerred by McDonald’s has sharply increased.

            My point to morganovich is that we are discussing not just the quality of the physical product – the comfort of the seats and the type of snack offerred on board an aircraft – but also the quality of the service. The dimensions of quality with respect to service are not the same as the dimensions of quality with respect to a physical product. Ease of acquisition is a service quality dimension.

            Mark was arguing that the real price for air travel has gone down, and the quality of air travel has simultaneously increased. Morganovich seems to take the narrow view that physical product characteristics constitute the only dimension of quality.

            Those of us who have spent an entire career in a service industry – my career has been in the air transport industry – know that the quality of service is far, far more important than the quality of physical product. Air passengers – as a whole – don’t give a damn about whether they are offerred meals on board or whether the seat covers are real leather. They do care very much about whether a flight is available when they wish to depart and about whether they are going to make it safely to their destination. All four of those service features – seat covers, inflight meals, frequency of departure, and level of safety – are dimensions of air passenger service quality.

          5. @Ron H. – Who would consider it a different product?

          6. Seth

            @Ron H. – Who would consider it a different product?

            Unless I misread him, I believe Seth would when he said the following as an explanation for the difference in price between the two burgers:

            Comparing the price of a Micky D’s burger that is 6 miles away to the price of a burger 2 miles away is not a like-to-like comparison unless you live in an overly simplified universe, which we do not.

            As morganovich pointed out, this discussion is deep in the bowels of subjective value, and there may be no common ground.

            I wouldn’t consider natgas in the ground and natgas at my stove to be different in quality, but I would consider them to be different products, a view that makes it easy to account for preferences and price differences.

    2. Its Gsatt

      Bring your own snacks. And who’s entertained by the air carrier anymore? Most are on their computer/phone ect. So providing these screens for a very select few who will actually utilize them provides very little return for the cost of the hardware and fuel it takes to lift that hardware. And I’m not kidding when I say they have the amount of fuel it takes to lift those screens calculated. Everything that flies has a weight. That can of coke, you bet. They know it all. Only thing generalized is human weight and their luggage. Generally a major airline that’s successful runs a profit margin of 2%, whats the typical profit margin of other industries? 5%+? Those peanuts come out of pilots paychecks.

      Technically customers could drop the prices even lower if we reduced the weight of the average person 10 lbs. Even better, weigh each passenger and price that out accordingly….I think Bloomberg and the first lady should consider that as a weight loss incentive……WOOOOO!!!!!

      The Point Dr. Perry brings up about the expansion of airports the regional airlines serve is a good one. I drove 5 miles down the road and flew direct Kalamazoo to Orlando. Badass. There might have been 40 people in the whole terminal that day. Lines?? Nope. Driving 2 hours to Detroit for a flight? Nope.

      1. charles platt

        I remember the typical media-driven handwringing when deregulation was pushed through by the Carter administration. There were many predictions that ruthless competition would cause airlines to cut safety margins. Planes would be falling out of the sky!

        Makes me wonder how many other industries could become safer if deregulated.

        What I miss are all those empty seats, back when airlines didn’t have to be efficient. Stretching out across four center seats on a 747 from JFK to Heathrow–that was a real pleasure. Cheap, too, if you could game the airlines’ fare system (the “average cost” of an airplane seat includes all the money paid by business travelers who can’t book far ahead–I’d like to see a comparison between 21-day advanced purchase fares, then and now).

        1. Its Gsatt

          Trying to skip out of work early right now to go pedal some miles in the sun, so I’m sorry for the lack of research. But I’m assuming the Russian airlines are largely regulated by their officials, and I do believe they had to shut down Red Wings airlines recently for wrecking too many planes this winter. Food for thought on planes falling out of skies.

      2. John Dewey

        Its gsatt: “And I’m not kidding when I say they have the amount of fuel it takes to lift those screens calculated. Everything that flies has a weight. That can of coke, you bet. They know it all.”

        Absolutely right. One airline recently saved millions of dollars in fuel burn by replacing heavy leather seat covers with synthetics; by replacing glass wine bottles with plastic; and by better matching the number of soft drink cans to the expected load factors for each flight.
        Every decision now made about cabin interiors and about cabin provisions considers the tiniest impact on fuel costs.

  2. Jon Murphy

    David Henderson had a comment on this piece as well. It prompts me to share this story:

    Henderson said he would have had to pay $288 to fly from Manitoba to Texas in 1965. Well, I just booked a flight from Manchester, NH to Charlotte, NC. The distance is roughly the same (1,500 miles as opposed to 1,400). I paid THE EXACT SAME PRICE in 2013 dollars as he would have in 1965.

    1. morganovich

      that’s not a terribly valid comparison.

      lots of routes are cheap, and many are not.

      sf to nyc is cheap per mile. nyc to hartford is not. you’ll pay more per flight, not even per mile for the latter.

      i just looked up the price of a flight from winnipeg to houston.

      the cheapest price on travelocity was $837.40.

      if you want to buy a seat as big as the old ones were, you need to go economy plus which will tack on another $160 and then you will pay baggage fees (but might get a free meal on an intl air canada flight) bringing the total to over $1000.

      you need to be consistent about comparing routes and seats here. just talking about $ per mile often masks more than it reveals between any 2 flights.

      1. Its Gsatt

        Going between international airports cost more.

        You have to use the same waypoints to truly compare.

        Having the city bus get off its rout to pick you up would break your bank. If the airline cannot consistently fill its seats between cities it either does not fly that rout, the gov. subsidizes a small regional to blow fuel, takes the loss to have that presence, or you help pay the cost for some of those empty seats.

  3. 1. Another factor contributing to a better air travel experience today is better airports, with a greater variety of shopping options, better and more restaurants (e.g. you can get high-quality Short’s Humaloopalicious IPA beer on tap at the Flint airport), yoga rooms (SFO), art galleries (SFO), medical clinics, massage, hair salons, etc.). Many airports now have free wireless.

    2. Even though there’s a fee involved, one new service that significantly enhances air travel for me is wireless Internet access on most flights now, at least for Delta. To be able to access email and blog at 30,000 feet is a great benefit for me, even at twice the price Delta charges.

    1. morganovich

      but that’s not really a valid comparison. you are adding features without adding in their price.

      the fact that you can buy somehting only makes the service better if you do buy it and if you do, then you have to add in the price.

      you seem to be trying to only count half the equation here while trying to ignore the fact that people clearly value the sorts of seats they used to get more highly than the ones currently offered and pretending there is no negative quality adjustment needed here in direct contradiction to what the market is telling you.

      1. John Dewey

        morganovich: ” you are adding features without adding in their price.”

        I’m not sure you understand the concept of quality all that well. Having more options during your travel experience is an improvement in quality.

        Deregulation is very much the cause for all those improvements at airports. Here’s the chain:

        1. deregulation sharply increased the number of passenger embarkments (air travel demand) at most U.S. airports.

        2. increased air travel demand at those airports increased the number of takeoffs and landings;

        3. increased landing fees, increased airport taxes, and increased parking fee revenue enabled the construction of far larger airport facilities

        4. larger airport buildings and increased foot traffic combined to increase the number of airport shopping options.

        Even if you personally do not use the improved shopping options, those options did improve substantially the quality of the air travel experience for the air passenger population.

        Again, though, I’m not sure you are using the same concept of quality which Professor Perry and I are referring to. And that’s why you don’t seem to be understanding what Mark is writing about.

        1. morganovich

          no john, it is you who are completely missing the definition.

          we’re talking about price level here. quality adjustments has a VERY specific definition with regard to price level.

          they are used to be able to compare a 2010 accord to a 2011 one and normalize for features.

          the fact that honda launched a new model family has NO effect on this.

          you are trying to take the notion that the whole air travel network is larger and use that to claim that any given seat on a given route is better which is absurd.

          if inflation were calculated using your metric, then the price of a big mac would fall every time a new mcdonalds opened.

          the concept you are using is flawed and inconsistent, especially if you are going to include cpi as a delfator.

          you are comparing apples and oranges and violating the same quality adjustment standard that is simply untrue here.

          lots of products have gotten better. there’s no question about that. but airline seats have gotten worse. for the same money, pretty much everyone would rather have 34″ of pitch than 30. that’s as close to a perfect definition of a product getting worse as you are going to find.

          people pay more for more space. we do not need to guess how much they value it at, we can look at the market price.

          people may find the smaller seats more attractive on a cost/benefit and choose to buy them, and choice is good, but that still does not mean they are not worse seats.

          i do not think you understand this issue at all.

          this is just going in circles.

          go read the BLS page on this.

          http://www.bls.gov/cpi/cpiaudio.htm

          increased choice is not the same as a change in the qualitative attributes of goods. adding 2 new kinds of onions at the grocery store does not make onions cheaper.

      2. morganovich – this is why your analysis of “apples to apples” is wrong – the value of extra legroom is inlcuded into the price charts. and of bags. but instead of everyone paying the same price (inclusion in the ticket price), it’s added on for the customers who value it, at the market price. its a different pricing structure than before, with those who value the legroom paying all the costs, and those who do not, paying nothing. previously, everyone had to pay for their share of legroom whether they valued it or not. so when the average flight is taken, the cost of legroom is distributed across all fares, resulting in the numbers in the charts. apples to apples.

        family travel is cheaper, because kids dont need legroom or checked bags, and can avoid paying for it with the current structure.

        and with jetblue there are no bag fees. with delta or united, a 75 to 90 annual fee will take care of a year of bag fees for me and everyone that travels with me. i more than broke even on one trip with my brother in february, and checked bags fly free the rest of the year. so if anything, those annual fees arent counted in total cost of airlines. but i havent paid for bags (avoid it) or legroom (dont need it) in years (well, maybe once), and anyone can do what i’ve done.

        so fees have also created a structure where people who travel more often can get discounts through having the airline card, and avoiding paying for bags, while those who travel once a year pay a bit more. that seems fair.

        as for food, domestic flights still have basic food. at most its $10 for premium food (i paid only $3 for a large bag of a great trail mix on a NYC to LA flight). and international flights still feed you very well, included in the ticket. for most domestic flights of 3/4 hours or less, anything more than the free food isnt so necessary. this is a non issue because the costs are small, if any. and again, those who value food can pay for it, and those who dont pay nothing. previously, people would just eat the food because it was there, not cause they actually wanted it.

        1. Adam

          Here’s what I believe morganovich is saying, and I’m sure he’ll correct me if I’m wrong.:

          In the days of government regulated prices we could only get the cheeseburger combo, which included all the fixings, fries and a drink, for a set price of $8.

          Now we can get a hamburger for $4, add cheese for 50 cents, add pickles and onions for 50 cents, fries for $1.50, and a drink for $1.50. We now have more choices, which is good, but if we choose the same meal we used to get, we will pay the same price as before.

          So yes, we can eat more cheaply, but not for the same meal.

  4. Jon Murphy

    I got to admit, the fee system doesn’t bother me. It allows me to pick and choose my perfect service.

    Something with a flat fee, I feel bad (ie like I wasted money) if I don’t use all the features. For example, if I stay at a hotel with a gym, I have a weird compulsion to use the gym, otherwise I feel like I’ve wasted money.

    But on a plane, if I do not want alcohol, I’m not paying for it. If I don’t want to watch their movie, I’m not paying for it. If I am willing to sacrifice leg room, I can do that. I’m paying only for my bags, not for everyone else’s.

    The downside to this system is that it does make advanced planning harder, but I think the convience and ability to save money makes up for it.

    1. John Dewey

      Jon Murphy: “if I do not want alcohol, I’m not paying for it. If I don’t want to watch their movie, I’m not paying for it. If I am willing to sacrifice leg room, I can do that. I’m paying only for my bags, not for everyone else’s.”

      That’s exactly why every airline customer should love fees. They only pay for what they want.

      We know that airlines are providing what their customers want. Passenger airlines is an extremely competitive industry. If one airline could steal customers by providing features another airline was offerring, they would have done so.

      Please remember that airlines have tried to offer some of the features morganovich complains are no longer available. American Airlines tried to offer increased seat pitch and lost a few billion in the process. Various airlines have tried to retain meals and found they were losing customers to the Peanuts airline. Some airlines tried to increase the number of first-class and business class seats and lost millions in discovering that their customer bas is just unwilling to pay for that.

      One thing that is important to remember: for many tickets sold to business travelers, it is the employer and not the passenger who is the customer. The employer decides what is worth paying for and what is not.

      1. John Dewey

        that sentence should read:

        “If one airline could steal customers by providing features another airline was not offerring, they would have done so.”

        1. Jon Murphy

          Exactly right, John.

          Most of the times I am on a flight, it’s fairly short: Manchester to NYC or Manchester to Ohio. I figure for a two hour light I can deal with less leg room and have the seat by the bathroom because, hey, it’s two hours. On longer flights, I’ll splurge for more leg room. On real long flights, I’ll splurge on alcohol because the only way I can sleep on a plane is to get drunk. I did Boston to Beijing once. 15 hours is a long time to have no in flight entertainment and not to sleep.

          1. morganovich

            i think that we are getting 2 ideas tangled up here.

            choice is good, as is modular pricing. both benefit the consumer.

            but to compare one product to another and measure inflation, you need to be sure it’s the same product.

            cpi tries to do this.

            to use that as a deflator for a comparison and then ignore such issues with the product being evaluated is just bad economics.

            it’s like comparing seasonally adjusted figures to non seasonally adjusted figures in any given month.

          2. John Dewey

            No, morganovich, we’re not just referring to price. What Mark noted above is that the quality of the air travel experience has greatly improved while the real price for air travel has gone down.

            You may not agree that the changes in air travel, altogether, represent an increase in quality. You personally may not value the improvements in air travel:

            increased airport shopping experiences, greatly improved air safety, higher frequencies, expanded inflight entertainment options, simplified reservations processes, electronic boarding passes, etc,

            as much as you valued the meals which were offerred, the slightly higher seat pitch, and other features which were lost following deregulation.

            But I am certain that the entire population of air travel passengers does value the improvements more than the deficiencies you list. How do I know that? I know that because free market competition – not government regulations – enabled the choices of the air passenger population to win out.

          3. morganovich

            no john, you are trying to take your subjective notions and use them to ignore a clear pricing signal from a market.

            seats got smaller. no one argues that.

            seats the size of the old ones cost more than the new, smaller seats.

            you do not need to take my word for it. the market is telling you unequivocally and flat out.

            you are being wildly disingenuous. you are trying to impose your subjective notions while accusing me of being subjective about seat size, when i am actually pointing at the market.

            do you have even 1 piece of empirical evidence that flyers value more food at the airport enough to pay more for it? how about evidence as to what the price of airport food has been then vs now? do flights with wifi get to charge more? nope.

            but people do pay more for bigger seats.

            you are piling up your subjective ideas, ignoring their costs in your calculations, and then trying to pretend that they are facts and that it is just my idiosyncratic view about seat size by ignoring the fact that i am giving you market data, not some view i made up.

            how do we know how much people value seated sized like they used to be? because we can look at what they pay. it’s about 45%. how do we know how much people value checking a bag? we see what they pay. it’s around $35.

            you are trying to claim that i ought to pay just for the option of food or wifi and ignoring that those things are not free. you are piling on purported benefits and ignoring the additional cost. where is the $14 for wifi in the ticket price? to get the benefit, you have to pay for it.

            you seem to have no idea what price level means or how it is calculated.

            i’m not sure what you call what you are discussing, but it’s not economics.

          4. John Dewey

            morganovich,

            Price and quality are two separate and distinct dimensions of a product offerring. We can prove that air fares (prices) have dropped because the airlines and the government has collected price data.

            We cannot “prove” that quality has increased because every single passenger has a different measure of quality. But we know that airlines have introduced innovations which passengers have been willing to pay for. As I said before, we know that because competition weeded out all the alternatives which passengers were not willing to pay for. By their actions – by airlines paying for certain innovations and not paying for others – we know that the quality of airline travel has met the requirements for quality of the majority of airline passengers.

  5. charles platt

    It occurs to me that if morganovich really wants that extra leg room (and perhaps seat width) and free food, there is always First Class. Of course it costs more, but perhaps the cost of a First Class seat today is not so different from the cost of a seat in Coach in the 1970s, in constant dollars.

    The benefits of deregulation for everyday people are very obvious when you consider the decline of long-distance bus travel. Bus companies can no longer compete with airlines. That should tell us something.

  6. juandos

    Ahhh, the good, old days and airlines…

    Guessing it was considerably more expensive back then…

    On the Huff-Po there is Slideshow vintage airline photos

  7. My wife and fly to Colorado Springs several times a year and have for almost 15 years now. Current ticket prices mean we pay about $.11 a mile each to get there and back. Flight time is about 3.5 hours with one stop in Dallas. Our second choice, a train, will get us there in 56 hours for almost 4X the price.
    I doubt that I could walk it for $.11 a mile.

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