Posted by Seth on October 24, 2011 under News | 
It is quite clear that the airlines wish it were not, and there are a number of people offering up suggestions on how to break the trend we’ve seen of pricing and marketing air travel as a commodity. But is that really in our best interests as passengers? I’m not so convinced.
The most recent claim on this front comes from Evan Konwiser via tnooz.com. The crux of Evan’s claim appears to be that:
We refuse to reward airlines by paying more for things like good service, nicer planes, quieter terminals, or shorter lines…. [B]ut then feeling indignant and wronged when the service inevitably fails to meet expectations.
I cannot argue this part of Konwiser’s claim. As travelers we do, indeed, shop based almost solely on price and ignore the rest of the details. Why? Because at the end of the day the products actually are, quite frankly, a lot like a commodity. The seat is going to be between 17-18 inches wide and have between 29-34 inches of pitch. It is going to be in a tube where you fly some hundreds of miles per hour and eventually probably get where you’re going. So where is the differentiation?
The airlines are pushing Direct Distribution architectures where they interact directly with the customer rather than using the legacy GDS systems for their fare and inventory distribution. The theory is that such means will allow the carriers to differentiate their product offerings versus competitors and tailor the sales pitch on more than just the price. As stated in the article:
Direct Connect offers some hope by differentiating the shopping experience and tying more tangible product enhancements to the purchasing decision.
By being able to connect directly with consumers at OTAs or metasearch engines via an API (or directly via the carrier web-site), airlines can in theory provide a customized experience.
They can change pricing, amenities, and features depending on who you are and what kind of trip you’re looking for.
While price is still a primary concern, it might allow airlines to throw in other “value” items that shift the decision away from pure price to a value trade-off. The more consumers actively make those choices, the more they can link the purchasing experience to the flying experience.
But the Direct approach still doesn’t address the largest issue – that the travel experience is decoupled from the purchase point. Yes, an airline can advertise that they only charge $6 on board for booze instead of $7 or that they sell fresh food rather than just snack boxes. They can even integrate the purchase process at the time of the transaction to get you a discount (and there is ample evidence of many airlines doing this today with bag fees). But that’s not going to drive purchase behavior. Certainly not enough to offset a $20 difference in price in most cases.
I am afraid that I must concede that the trend towards the Direct model – where the airline can "tailor" the offering to the known customer, including skewing the price if they so choose with little to no transparency – is one that seems unlikely to be stopped any time soon. Such a trend will, for the near term, make it more difficult for customers to effectively compare the total cost of a journey, just as is the case today due to variations in bag fees for most customers on most airlines. It is hard to see how this is good for the consumer, especially when the product is essentially the same other than schedules.
If an airline were to offer some distinct difference and market on that then perhaps they’d beat the price comparison pressures. Midwest did so for quite some time with their larger seats and cookies in flight. But they couldn’t maintain that difference as they expanded to compete with the larger carriers. And there is scant evidence that any other carriers would be able to either.
I’ve written previously, railing somewhat against the Direct model and the potential impact it can have on customers. I’ve got nothing against the airlines offering up more data about the services and associated costs of the various bits of the travel experience. Far from it, actually, I’m hugely in favor of the airlines sharing that data in a consistent, indexed and searchable manner. The difference is that I want to see the data shared across a common platform so that everyone can see all the bits and compare them rather than the airlines only showing some parts to some customers and other parts to others.
Becoming a market leader should come from actually having the best product, not from obfuscating the details and hoping no one notices that you’re toying with them on the cost side of the equation. Maybe it is a chicken and egg game where no one is willing to pay for the better product because no one knows about the better product. But if that were really the case then it seems unlikely that United Airlines would have committed to keeping EconomyPlus in their fleet post-merger or that Delta would have matched the product with their deployment of Economy Comfort fleet-wide which was announced yesterday. And those airlines seem quite content to keep offering the product, knowing that they’ve monetized and commoditized it.
Blame the GDS companies if you must for not adapting quickly enough, but the airlines are still mostly to blame for not actually offering a substantially different product from each other. And why should they when consumers have demonstrated time and again that they are rarely going to pay for it?
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Posted by Seth on September 28, 2011 under Flying, News |
The United Kingdom has long been known for a rather brutal tax known as the Airline Passenger Duty ("APD") assessed on departing passengers. The fee is variable based on the distance of the flight and the cabin of service, with premium cabin passengers paying twice as much as folks riding down the back and the cost for travel to the USA at £120 (~$180 these days) up front. The tax is, depending on who you ask, designed to offset the environmental impact of all the flights or to simply discourage people from flying.
Apparently, however, rather than meeting either of those goals in Northern Ireland is has a different effect: It drives traffic across the border to the south. Departures from Dublin incur minimal taxes (~$5 these days) and shuttle service between Belfast and Dublin is cheap and readily available. The net effect is that passengers are simply skipping out on flights from Belfast and the British Treasury is getting none of the cash.
That’s changing now as apparently someone finally realized that it is possible to tax a product out of existence. The government has chosen to slash the long-haul APD for flights out of Belfast. Currently the only service affected is a daily flight between Newark and Belfast on Continental Airlines which was apparently in danger of disappearing. That service will remain, in part thanks to this change,
…maintaining Northern Ireland’s vital economic air link to North America, and Northern Ireland will gain a fresh opportunity to develop other long-haul routes to the rest of the world.
The APD for long-haul flights will be reduced to match the short-haul rates. That’s a difference of £48 for economy class passengers and £96 for folks up front (passengers will be charged £12 or £24).
No word yet on whether Continental will be letting customers save some money thanks to this tax cut or if they’ll be raising their fares to compensate for the cut in the taxes and pocketing the difference for themselves. I’m betting on the latter.
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Posted by Seth on September 12, 2011 under Flying, frequent flyer, Mileage Run, Trip Reports |
Anyone ever tried to buy a round of drinks for an entire airplane? I did today and the logistics were surprisingly complicated. Maybe that’s because no one ever does this sort of thing. Or because it is ridiculous. But that mostly just describes me so I gave it a go.
American Express offers a $200 credit to platinum charge cardholders to offset the various fees airlines will hit you with these days. The catch is that it can only be used against one airline and once you choose the carrier you’re stuck with that choice for the whole year. Most of my flying is on airlines where I have status and I rarely check a bag, even when I don’t have status. Plus I get upgraded a fair amount so food and booze are often part of the deal. Nearly a year into the program’s existence I haven’t figured out a scenario where I could reasonably spend that $200.
Sitting a lunch with a friend in Anchorage I decided that today would be the day. I was going to commit my $200 in "fees" credit to Alaska Airlines and get my money’s worth. It is my first flight ever on Alaska and probably my last for the year so committing to spending the $200 on my own is too tall a task. But with a little help it shouldn’t be much of an issue. After all, it is a flight to Honolulu and folks should mostly be pretty happy about that, right? A free drink should make it even better.
After stowing my bag in the overhead bin I made my way back to the galley to explain my plan to the flight attendants.
Me: Hi there! I’ve got a strange situation here. I want to buy drinks. A lot of them.
FA: Huh?
Me: I want to buy the first round for the whole plane. That’s probably 40-50 drinks, right?
FA: Huh?
OK, so the quotes aren’t entirely verbatim, but the confusion expressed by the FAs was pretty close. We spent the next 10 minutes chatting about my scheme and trying to figure out the best way to handle the logistics. One option was for her to run the card 30+ times and have me hand the receipts to the lucky drinkers. We threw that one out pretty quickly as way too much work. Eventually we agreed that they’d just do a normal beverage service but rather than charge everyone they would just tally the total drinks consumed and I’d pay the bill at the end of the service.
Because the offer was only revealed after the drink was ordered the initial damage was actually rather limited. We didn’t quite get to the $200 threshold on the first pass. This, of course, raised another issue of trying to figure out how to spend the rest of the credit on board. I made a sign, figuring I’d walk through the cabin offering up the drinks that way.
Ultimately, however, that seemed less friendly. So I just started asking folks if they wanted a drink. I’m wearing a Hawaiian shirt that is similar in color to that of the flight attendants so A few people confused me for that; I even had one ask how to fill out the agricultural declaration form. But once I explained that I’m just a guy buying drinks for anyone who wanted one I did manage to get a few takers. Pretty soon my sales efforts were rewarded and the $200 credit (and a few dollars more) was over. I was willing to keep going (a bit) but the third beverage service is about to start and that means free mai tais for everyone!
I had entirely too much fun on this flight. I don’t know why but flights to Hawaii make me want to have more fun than most. Also, a special thanks to the crew from Alaska Airlines who were willing to help me out on this ridiculous bit of entertainment.
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Tags: Alaska, Alaska Air, Alaska Airlines, American Express, Anchorage, elite status, fees, Hawaii, Honolulu, Mileage Run, PacificLines, Trip Report, upgrade
Posted by Seth on August 26, 2011 under Flying, frequent flyer, News |
American Airlines announced yesterday that they have expanded their Preferred Seating product offering. While this is being spun as making more seats available to all customers they are conveniently overlooking the part where such availability comes at a price – starting at $4 per seat per segment. This paid option starts at the 24-hour check-in window and will be available throughout the check-in period.
For customers interested in select aisle and window seats near the front of the main cabin, Preferred Seats are available for purchase as early as 24 hours prior to departure with prices beginning at $4 USD per flight.
Taking a look at a seat map for a flight with no customers yet booked one can get some ideas of what the seating options are. The forward two-thirds of the aircraft no longer offers aisle or window seats for free to non-premium passengers. That’s pretty rough. The MD80s are actually worse than the 737-800s, I think, as the two seat side is pretty much entirely blocked. There are significantly fewer free aisle or window seats available.
American is quick to point out that passengers choosing to not pay for a seat assignment will be given one for free. If there are still middle seats left to be assigned those will likely be the free ones. The company also points out that not all blocked seats are Preferred. Some are Preferred Plus, reserved only for elites and full fare customers. So the fee a non-elite pays for a seat assignment doesn’t even necessarily get them a particularly great seat.
The company is also advertising that active-duty military get free access to these Preferred seats. The fine print suggests that might actually only apply when they are ticketed on military fares, but it is not clear how this will actually apply at the airports.
Lest folks think that only non-elites are losing out here, it seems that elites are actually losing in some scenarios. Yes, they now get complimentary access to more seats (including bulkheads) which is a benefit, but they are also losing the ability to have companions on a separate reservation granted the good seats for free. That’s not so great.
Finally, there is one awesomely awful quirk in the new policy with respect to award tickets. While AAnytime Award tickets (double miles) are considered premium and will get the seats for free the same cannot be said for MileSAAver level (normal rates) tickets. In fact, these tickets are expressly ineligible for even paying for the seats.
We’re excited to provide you with even more options to customize your travel experience based on your needs.
Apparently paying more for the exact same seat assignment is a great new option for customers. I’m not buying it.
Posted by Seth on August 9, 2011 under frequent flyer, News, points |
I’ve written many times about my love for free award changes as a top-tier elite. It is one of the most valuable benefits of airline status to me and one that I use a ton. It is not uncommon to find that a better seat/route/time might open up with award inventory just a day or two prior to departure as the operating carrier realizes that they will not be able to sell the seats and they are willing to take some points off the books in exchange. In fact, my most recent Lufthansa first class experience was a direct result of one such change, with the seats becoming available about 48 hours prior to the flight and me making the change about 36 hours prior to travel.
Had I been using Delta SkyMiles that change would not have been possible.
In a new policy announced today and which takes effect on 15 August 2011, Delta has stated that all awards will be considered non-refundable and non-changeable at 72 hours prior to departure. This comes just two weeks after the announcement that the awards would expire at the time of departure. The change applies to all SkyMiles redemptions, including those of Diamond and Platinum elite members.
Customers who would book a mid or high tier award as a hedge against nothing being available would previously be able to change that award to a low tier seat – and save a lot of miles – if the award inventory opened up. And if those seats were to open up it was quite commonly 48-72 hours out. With this new policy making that change – from high/mid to low at 48-72 hours out – is now impossible. Sure, the passengers can take the chance that the low will open up anyways (Delta is spinning this change as something which will "make those seats available to other members and ultimately increase award availability."). But that’s a pretty stupid bet to make from a customer perspective.
There are a couple interesting things that the change shows. For starters, apparently there were 400,000 awards that were not flown (and presumably refunded) nor canceled prior to departure in the prior year according to the Delta representative announcing the change. There were 1,000,000 awards that were sitting booked at 72 hours out that were never flown. That’s a lot of award miles that would be forfeit should the customers not make appropriate changes. It is not hard to see where Delta got the idea to make this change.
Another interesting bit is that they made these two announcements only two weeks apart. That’s two adjustments to the same policy, a policy that had existed for a long time with no variation, announced so close together that it is hard to believe someone competent actually approved the timing of the decision. If you’re still considering changing it further, particularly when that further change is so similar to the initial one, why not just wait until you’ve made a final decision and announce the change then? Sure, the change sucks for customers. No doubt about that. But the fact that it was changed twice in such a short period is truly pathetic.
Finally, the announcement of the change and its retroactive impact on the validity of existing award reservations is questionable. The program terms includes conflicting information on that topic:
Delta and its program partners reserve the right to change program rules, benefits, regulations, Travel Awards, fees, mileage Award levels, and special offers at any time without notice. This means that Delta may initiate changes, for instance, impacting partner affiliations, rules for earning mileage credit, continued availability of Awards, or blackout dates. … Unless otherwise stated, the terms and conditions of the SkyMiles Membership Guide and Program Rules in effect at the time of your travel, request for a benefit, or other transaction will govern the transaction.
Those are the first and last bits of the same paragraph. It is not hard to believe that the last line says that the rules in effect when I conducted the transaction – issuing the award reservation – should apply to that reservation. Based on everything Delta has stated so far, however, they will be using the first line as their policy and applying this change to existing bookings as well.
Ultimately this is just another in the long line of changes made to the SkyMiles program that devalues the points for their members. At least in this case the folks in Atlanta know that the change is not going to be well received. Didn’t stop them from making it, though.
They’re not known as SkyPesos for nothing, folks.
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Posted by Seth on May 10, 2011 under Flying, frequent flyer, News, points |
I have to say that I’m incredibly intrigued by NY Times blogger/columnist and statistics guru Nate Silver’s apparent sudden interest in air travel. His last post about which airports are most expensive was certainly a fun read, particularly as I disagree with many of his points. This week he brings up another topic – hidden-city ticketing – and has decided that the rules simply do not matter.
Hidden-city ticketing is pretty simple. So long as you are not checking luggage and don’t care that the rest of your ticket will be canceled, it is often possible to purchase a connecting ticket through a hub that is significantly cheaper than a flight just to that hub. For the most part the pricing anomaly comes from the fact that non-stop flights are often more expensive as there is generally less competition and they are more valuable to the consumer thanks to the shorter overall travel time (something Silver overlooked in his last column). So, given the opportunity to buy a cheaper ticket based on pricing for a market that you have no intention of actually visiting, Silver says you should.
He acknowledges that the rules prohibit the practice, but also notes that you are unlikely to get caught and even if you do there isn’t much the airlines can do about it:
Making a habit of this certainly won’t endear you to the airlines. Most of them — the major exception being free-spirited Southwest Airlines — expressly forbid it in their ticketing rules. But those rules don’t carry the force of law, and most travel lawyers say that their recourse is limited. They could probably preclude you from flying with them in the future, but their case for demanding penalties is weak, and the risk of detection is low if you don’t book these kinds of routes more often than a couple of times per carrier per year.
I’m actually pretty sure that JetBlue also doesn’t frown on the practice but they also generally do not publish fares that would benefit from such an approach. Perhaps my favorite line in the column is this one about what to do should you get caught:
Instead, proudly state that you’re doing your part to help the airlines understand the inefficiencies in their pricing structures, and that you’re bringing exorbitant fares more in line with the free market.
Ummm, yeah. That’ll go over well. Perhaps recognizing that the "free market" means they charge what they want and you have a choice of whether to purchase or not would also be useful. Don’t get me wrong, I have exploited the benefits of hidden-city ticketing on occasion and I’m not violently opposed to the practice. But pretending that doing it is good for the airline is just plain silly.
It is also worth pointing out that the airlines do have one other path of recourse. In addition to banning you from flying with them, they can also close your frequent flyer account and take away all your points. Depending on how many you have banked that could be pretty painful.
It is also worth noting that the Germans have recently come down on the side of consumers in this situation, allowing hidden-city ticketing more openly, though it still may require fighting the airlines in court to get the fare honored. Probably not worth it.
Oh, and if you use a proper travel agent rather than the airlines’ site directly or an OTA like Expedia or Orbitz you also run the risk of them receiving a debit memo and being held liable for the fare difference. That’s never a good surprise.
So, is hidden city ticketing really all that bad? How high is your risk tolerance there?
More on this from BoardingArea blogger UnRoadWarrior.
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Posted by Seth on April 14, 2011 under News |
It seems lately that all the discussion fees and airlines involves how annoying they are and how there is no end in sight to what the airlines will think of to charge for. While that is mostly true, there is the occasional positive development on the fee front, where things get better rather than worse. Frontier Airlines announced this week that they are reducing a number of their fees.
Fees covering flight changes ($100->$50), checked baggage ($25->$20 if paid online) and name changes ($100->$50) will all be reduced under the new scheme. So will same-day flight changes at the airport ($50->$25, plus fare difference). And excess bag fees will be standardized across the carrier’s route network ($50).
Definitely still a lot of things customers will be paying fees on, even with the new rules, but in a business market that doesn’t seem keen to remove the fees any time soon, lower is a step in the right direction.
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Posted by Seth on April 11, 2011 under News |
Apparently it is the season of producing bad statistical interpretations of the airline industry. First there was the NY Times piece that failed quite notably to account for the primary factors of airfare pricing. And now we have the annual Airline Quality Report and the associated article, America’s Meanest Airlines.
With a headline like that you’re bound to get plenty of readers. What you do not get, however, is a particularly useful analysis of the underlying data. The authors of the AQR describe their research as bettering the historically subjective analysis that had previously existed in the industry. They use objective measures instead. Sortof.
Using the Airline Quality Rating system of weighted averages and monthly performance data in the areas of on-time arrivals, involuntary denied boardings, mishandled baggage, and a combination of 12 customer complaint categories, airlines’ comparative performance for the calendar year of 2010 is reported.
The first three categories are definitely objective, though still skewed as noted below. That last category, not so much. After all, not only must there be a service problem but the customer must also know that they can file a complaint to the DoT and then figure out how to do so. Most customers simply don’t. So while it may be the best data we have, it is not great data in that category.
The researchers also conducted significant surveys to determine how important the 4 categories of statistics are to passengers. On a scale of 1-10 the four categories range between 7.17 and 8.63. That’s not a ton of range, though having a bit of weighting between them is better than nothing I suppose.
But my biggest beef with reporting the results as a meaningful measure of airline quality is that there is rarely statistical significance between the values being compared. This is most noticeable in the "customer complaints" category, where the values range between 0.44 and 2.00 in this year’s results. That’s the number of complaints per 100,000 passengers. Suggesting that such a tiny variation across such a large user population matter is a specious claim, yet it represents nearly 20% of the value of the AQR score, sortof.
On-time performance has the broadest spread – from 75.7 – 92.5% – and also gets the highest weighting (and then some, as noted below).
The spread on mishandled baggage for mainline carriers is between 1.63 and 3.49 instances per 1,000 passengers. This can either be reported as one being twice as bad or both being incredibly good; it is all about how sensational you want the headline to be. And whether one regularly check bags or not probably skews the value of this metric. Priority baggage handling (and no fees) for elite passengers also probably skews the importance of this factor more in recent years than in the past, though the weighting has remained constant.
The variance for involuntary denied boarding is 0-2.26 instances per 10,000 mainline passengers. It would certainly suck if you’re one of the two, but it is not clear that there is sufficient statistical within that range to discern that one carrier is better than another.
The most common category for customer complaints in each of the 12 months is "Flight Problems." This category covers "cancellations, delays and other deviations from schedule" which seems to be quite similar to on-time performance ratings. I happen to agree that getting where I’m going, hopefully close to on-time, is important, but not so much so that it is worth giving it extra weight above and beyond the established 8.63 weighting. With nearly 30% of the complaints in this category they are effectively worth an extra 2.4 points.
The second highest ranking category of complaints in 10/12 months was baggage related. This is on top of the wholly dedicated missing baggage category in the formula. Similar to the on-time performance numbers above, this results in baggage receiving an extra 1.14 points of significance in the scoring.
At the end of the day, the fact that they’re using consistent calculations and mostly objective numbers means that tracking trends is viable. The question is what the value of those trends really is. Sadly, in this case, the reporting is trending towards the sensationalistic rather than observing statistically significant variances. But these guys get a lot of press and the airlines who win tend to brag about it. I guess objective analysis is overrated.
Read the AQR report here (PDF!).
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Posted by Seth on April 7, 2011 under News |
Yesterday had a bit of a buzz on the internet regarding a piece about airfare pricing from Nate Silver that was published on his NY Times politics blog. The post, filled with mathematical analysis, attempts to use statistics to determine which airports have unfairly high fares relative to others providing comparable service. And I’m sure the math involved is accurate. I have no doubt that someone as statistically gifted as Silver got the regression analysis correct when he ran the numbers. But the findings are still miserably flawed.
Why? Because several of the assumptions made simply do not apply to air travel.
Silver acknowledges that most the other folks who have tackled this topic have made specific flaws in their assumptions. He aims to correct these but instead makes some tragic assumptions of his own.
Let’s take a look at the factors he considers:
The first factor is the distance traveled — we use the distance from the origin airport to the destination as though it were a nonstop flight, whether or not there was a layover along the way….
The first factor cited – distance traveled – is probably one of the last things that actually comes into play when airlines are figuring domestic market pricing. Should they? I can see that argument being made, but it ignores the general concept of market pricing and supply/demand dictating the going rate for a ticket. If the airlines wanted to price everything based on distance they could, but they’d be leaving a lot of money on the table for the shorter flights and they’d never sell the longer ones. Even just using the average costs to operate a flight as a price basis you’d be looking at $600+ on average for a round-trip transcontinental flight. They seem to sell a lot better in the $300 range, at least in major markets.
Silver chose to ignore whether there is a connection or not. While that is reasonable for calculating the distance traveled, it ignores perhaps the single greatest factor that drives travel bookings for business travelers, the folks paying the higher fares: schedule. When you’re a business traveler hopping between cities and trying to get to that next appointment on time and then home as quickly as possible you pay more for a non-stop flight. Should you? Maybe, maybe not. But you do. This pricing function is probably more directly traceable in cargo numbers and there is a ton of data available on that, including in Greg Lindsey’s Aerotropolis, a pretty good read. But the same concept absolutely applies to passenger travel as well. There is a very real value in speed out in the real world; there apparently isn’t one in Silver’s.
Silver found that Newark was about 25% more expensive than JFK based on his data. And there is no doubt that is the case on some routes. But when you also consider that Newark has quite a few more domestic destinations available as a non-stop flight than JFK does that price premium isn’t nearly as surprising. After all, folks pay for speed.
Certainly demand factors into the pricing as well:
Second is a variable representing the demand for travel at both the origin and destination airports. Demand is assumed to be a function of the number of origin-and-departure passengers that an airport handled (not counting passengers who passed through the airport on a layover), but with a modification for average ticket prices. In other words, if the average fare at an airport was high, the model assumed that more people would have wanted to fly there but were deterred by the cost, and if the average fare was low, that some passengers would not have flown if the fares had not been such a bargain.
Indeed, one can expect that fares to smaller destinations will be higher. And they generally are. But assuming that more people really want to be traveling to smaller cities but choose not to because the airfare is too high misses the point. They are smaller cities with lower demand for travel because they have fewer businesses, fewer residents traveling (or being visited) and generally less volume. They aren’t seeing lower air traffic because they are too expensive, they are seeing lower traffic because they are small. Lowering fares may translate to a small increase in volume but it most certainly is not a linear path.
Moreover, the ability for a new entrant to operate in a market requires a certain base level of demand. No matter how cheap the fares, you aren’t going to survive long as a startup carrier if your hubs are in Columbus, Ohio and Greensboro, North Carolina, for example; just ask SkyBus. This means major metropolitan areas see the up-starts, and those up-starts bring lower fares because that’s how they attract customers. Their fares go up over time – JetBlue and Southwest have proven this – but that’s where it begins. And that explains a lot of the pricing trends that are seen today.
Finally, Silver looks at the most important factor, competition:
The regression analysis also accounts for three other factors that have significant effects on pricing. These are, respectively, the market share at the origin and destination airports held collectively by the five “legacy carriers” (United, American, Delta, Continental and US Air); the market share held by Southwest Airlines; and the market share held by the largest single carrier at that airport (for instance, Delta and its affiliates are responsible for about 66 percent of all traffic at Atlanta).
…
Passengers at Newark paid an average of 12 percent more than those at J.F.K. for their trips to Los Angeles, 49 percent more for those to Chicago, 65 percent more to Dallas, and 118 percent more to Washington, D.C.
Given those numbers, it is probably useful to take a look at the competition in those markets. There is zero competition between Newark and Washington, DC. National airport is only served by Continental and Dulles is served only by Continental and merger partner United Airlines. Plus, those routes are not generally reasonable to fly with a connection. The travel time is so short that when you add the connection it is silly to fly when total travel time is important, as it often is. The Dallas route sees a bit of competition from American Airlines, as does the Chicago route. Los Angeles has a tiny bit of competition but it also has the advantage of being a long enough trip that making the schlep over to JFK to save some money on airfare doesn’t actually completely ruin the speed=value margins. Ditto for connecting flights that add a smaller percentage of time to the travel experience.
Somewhat ironically based on the first factor Silver names, longer distances traveled can actually drive down prices as the impact of connections or less desirable departure or arrival airports is decreased as the total travel time increases.
It is actually surprising that Silver didn’t note the disparity on pricing in the Newark/JFK – Boston market. For quite some time now Continental has held a monopoly on that route. Similar to the DC runs, it rarely makes sense to connect for such a short trip and Continental exploited that price disparity. Right up until JetBlue announced their entry into the market. The fares dropped quite quickly at that point. Hardly a surprise, really. Competition, not the airport, drove the pricing.
Here’s a much more simple way to figure out if an airport is expensive or not:
- Is it a mostly leisure destination? If the answer is yes then it is almost certainly not going to be as expensive on average. Atlantic City, Las Vegas, Ft. Lauderdale, Orlando and most the rest of Florida all come to mind, and not surprisingly they’re all on Silver’s list of good value airports.
- Is it dominated (60%+) by a single carrier?
- If that carrier is United, Continental, US Airways, Delta, American or Southwest then odds are it will be a more expensive airport.
- If that carrier is AirTran, Spirit Air, JetBlue or Allegiant (and, to a lesser extent, Frontier) then odds are it will be a less expensive airport.
- Is it a particularly large metropolitan area? If not, fares are going to be higher because demand is lower.
Three easy questions that don’t take statistical regression or misguided assumptions. Silver actually gets some of these, particularly regarding the competition factor. But he also has a couple huge misses, especially around distance traveled and the price/demand curve.
It would also be interesting to compare the actual costs of travel versus just the base fare data. Spirit has a pretty incredible ancillary revenues per passenger – to the tune of an extra $35/head on average – so those "cheap" airports can come with significant surprises once the customer gets to the airport. Indeed, the airlines are quite keen to sell these ancillary bits to their customers and many are now stating explicitly that these fees are where their profits are. The airlines even want to control the way those fees are marketed to the customer by cutting the GDSes out of the pricing loop. Not a good deal for consumers.
Oh, and the suggestion he links to about searching for the best airfares on weekends is horribly wrong, too. Tuesday or Wednesday mid-afternoon is the time you’re most likely to find deals. On the weekends the airlines are raising fares and limiting the cheaper inventory in an effort to cash in on folks shopping for their vacations while their home with their family.
Silver should stick to baseball and politics, two things that he appears to understand a lot better than air travel.
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Tags: AirTran, American Airlines, Atlanta, Boston, Chicago, Continental, Delta, fees, Florida, Flying, Frontier, JetBlue, Las Vegas, Los Angeles, Southwest Airline, Spirit Air, United, Washington DC
Posted by Seth on March 17, 2011 under frequent flyer, News, points |
Yesterday it was announced that Continental and United Airlines are aligning their award charts for flight redemption. Initial reviews were mixed (Lucky didn’t think it was so bad; neither does Gary) and ultimately I think that mixed is the best way to see the changes. There are some good and some bad. But from my view the bad ones are REALLY bad. There are a couple awards that have gotten VERY expensive. Fortunately, however, it seems that there are workarounds in many cases.
First, the background. The changes take effect for awards booked on or after 15 June 2011. Until then the old charts for Continental and United still govern. This means there is still room for arbitrage on certain awards that are higher or lower cost between the two programs thanks to the points being fungible between the two.
The changes will also remove ambiguity in the region assignments for some countries that currently exist in multiple award charts. That will be quite nice, if not necessarily resulting in lower prices in all cases.
And, on the plus side, there are a number of rewards that are actually getting less expensive. Most notably for me is that tickets in business class between the US and Europe will go down in price from 105K to 100K. Actually a lot of regions are seeing business class awards drop in price for travel to/from North America. Given that the best value in awards is often in these premium cabin tickets this is mostly a good thing. And Asia stays very attractive on the award charts.
Coach awards – where more people actually redeem – have gone up in many regions, including the US-Europe and US-South America. US-South Africa seems to be the only area where the prices went down in coach.
And then there are the scenarios that are VERY ugly in the new charts, mostly with respect to upgrades. Upgrade awards have been losing value for a while now. They used to be considered the best value for redemption a decade or so ago. And maybe they still are for some folks who have someone else buying them full fare coach seats. But if you’re buying your own tickets the value of upgrades continues to decrease. This latest award chart adjustment further hammers that point home.
First, there are the actual mileage amounts. Many categories have seen an increase in the number of points required for an upgrade. A few have remained level. I haven’t found any that have decreased in points required. OK, so it is an extra 5-10K miles round trip for an upgrade. Not a tremendous change but still annoying.
Then come the co-pay fees. The airlines basically have decided that the cheapest fares should not be upgradable. Rather than prevent such upgrades, however, they simply charge a "co-pay" to increase the fare paid to balance out the cash side of the ticket. That’s in addition to the miles required. Pegging a point’s value to a penny – the common, conservative rate – and adding in the co-pay it is actually ridiculous in many cases to buy an upgrade.
The cheapest fares between North and South America require 35K points PLUS $600 each way for an upgrade, on top of the coach fare. That’s roughly $1900 in cash + 70K points, along with the $1200-$1500 (plus taxes and fees) of airfare. Or you could just redeem 100K points for the same ticket. Redeeming for an upgrade is a losing proposition in nearly every case, even taking into account the points earned for the travel and any other benefits you’d get.
I never really considered the upgrade award a good idea. It is now probably the worst value option out there. Very bad idea.
As a parting shot, it is also worth noting that the golden goose of the legacy Continental award chart is also disappearing. The "Around the World" or RTW award from Continental is one of the best values out there at 160/220/280K in Y/C/F. The rates on that award are migrating to the legacy United numbers of 200/300/400K. That’s a 25-40% increase on those numbers. Not a surprise, really. Actually the surprise is that it lasted as long as it did. But still sad to see it go.
Things could have been a lot worse. There are definitely some bright spots on the charts. But, like always, understanding the changes and planning for them will help maximize the value of the points.
Check out the new and old charts here.
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