How to price air travel properly

The current pricing model for air travel is nonsense stacked upon nonsense. Single fares, return fares, fees for changes, discounted and flexi fares, business fares, loyalty bonuses… all nonsense. It developed as an anti-competitive arms race between the airlines of the 70s and escalated from there. Nonsense. Here’s how to price air travel properly.

The cost of a seat has three components:

  • A fare, valid for a segment class, season, and class of service. For example “Between UK and East Coast US, standard service (economy), spring-summer 2014” £345.
  • An option to travel on a particular date, flight, and seat. For example “Option to travel on VS45, LHR-JFK, May 17, 2014, rows 28-37” £73.
  • An efficiency bonus. For example “Returning within a week, returning on the same weekday, checked baggage, full flight” -£65 (discount). Or another example “Short connection, Roll-on luggage, meal” £35 (surcharge).

To travel, you need to purchase a fare and at least one option for the flight you want. When you check in you may get money back as an efficiency bonus, or if you do certain things you may be asked to pay surcharges.

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The air travel rant

Note, this is a fairly superficial rant. Don’t tell me that it isn’t an in-depth analysis of the transport industry, I know!

Air travel is stuck in the 1960s. Not the planes. The planes have evolved greatly but the airlines, the service offering, and the experience are stuck in the ’60s

The airlines
Why do airlines still exist? Or rather why are the plane operators still so visible to the customer? Buying travel from an airline is like buying energy directly from a company that runs power stations.

Running planes is, for all practical purposes, a commodity service. Safety is governed by regulations and the economics are better the fewer and larger the planes. Aviation would be better run by commodity carriers.

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