Fares “R” Us
Posted by Ben on April 8th, 2004
Stumbled across an interesting article in the NY Times today on airfare rules, and how people are bending them in order to save money by doing things like using only half of a round-trip ticket.
What gets me is the tortured logic the airlines use to justify some of their rules. Here’s a quote from the article:
The ticketing rules, adopted in the 1980’s, are primarily intended to prevent business travelers from buying cheaper leisure fares, and how often they are enforced is a matter of some debate. Tim Wagner, a spokesman for American Airlines, said the carrier could detect back-to-back or hidden-city ticketing more easily than it could someone’s buying a round-trip ticket to fly one way. “It’s almost impossible for us to know why someone didn’t use the second half of a ticket,” Mr. Wagner said.
Nevertheless, he defended the airline’s throwaway ticketing rule. “If somebody books a round-trip ticket and never intends to fly that second portion, that’s lost revenue for us,” he said.
Huh? You’ve already got my money for the trip. If you’re selling round-trip tickets and not making money on them, you’ve got deeper issues a good finance wizard should look into.
Here’s my dumb airfares story. Back in 2002, I was planning to go home for my birthday from Chicago to St. Louis. Normally, I’d drive this. A couple days before, I got word I needed to be at a plant trial on Monday morning in Lowville. So, I start looking for fares from St. Louis to Syracuse, returning to Chicago. Best I can do is around $900. Coincidentally, to get to Syracuse from St. Louis, you end up having to go through Chicago anyhow, so my ticket was for STL-ORD-SYR (Sunday) SYR-ORD (Tuesday). Then, I decide to see how cheap it would be to fly home, making my routing ORD-STL (Friday), STL-ORD-SYR (Sunday), SYR-ORD (Tuesday). The fare?
$600. Go figure. I save the company $300 by taking one extra flight. Too bad I didn’t get to pocket the savings…happy birthday to me!
In another related article, they quote a guy as saying “we had markets where we had 70 and 80 different fares filed for a given city pair.” Why? The low-cost carriers are the only ones making any decent money, and they usually only have 4 or 5 fares for any given flight.
Here’s my favorite bit:
As Warren E. Buffett has often pointed out, if one tabulates all of the airline industry’s finances since the day the Wright Brothers bounced into the air at Kitty Hawk in 1903, one will discover that, cumulatively, there has not been a single penny of profit.