Are Airline Customers Fleecing the Industry by Getting Cheap Flights?

Are Airline Customers Fleecing the Industry by Getting Cheap Flights?

Derek Thompson over at The Atlantic has a new video about the costs of air travel in the United States. He goes through the history of deregulation in the industry and shows how air travel today is quite a bargain. While he gets a lot about the industry right, Thompson has some bizarre conclusions.

"Customers hate fees because we feel like we're being fleeced," Thompson says. "But in a way, we're the ones fleecing the airlines. This is an industry that lost $51 billion between 2001 and 2011."

What Thompson fails to mention is the various ways that governments (on both the federal and local level) have bailed out and subsidized the airline industry since its deregulation in the late 1970s. Sure, deregulation brought down prices, which was great for consumers. But when bailouts and sweetheart loans are tossed around with our tax dollars, it's hard to argue that we as tax-paying consumers didn't ultimately pay for a portion of that old fashioned ticket.

Air travel may be a real bargain, but when you look at the history of the airlines, you can't claim that customers are "fleecing" the poor, defenseless megacorporations.

Pending approvalOriginal post by Matt Novak on Paleofuture

Air Travel Today is a Damn Bargain

Air Travel Today is a Damn Bargain

It might not feel like it, but air travel's a steal compared to what it was a half century ago. Since the American airline industry was deregulated in 1978, ticket prices have fallen by about 40%. Of course, air travel isn't quite as luxurious as some postwar dreamers imagined, but you can't beat that price. So just how much more did it cost to fly in the 1950s? Quite a bit, once you adjust for inflation.

The May 27, 1955 issue of Collier's magazine included an ad from the now-defunct Trans World Airlines (more commonly called TWA), which gives a fascinating peek at the price of air travel at the dawn of the Jet Age. The world was indeed getting smaller thanks to the airplane. And compared to rail and bus, TWA wanted Collier's readers to know that if you took into account the travel time and cost for meals, going by plane wasn't that much more expensive. "Don't forget, your travel time is worth money, too!" the ad exclaimed.

A one-way flight from Los Angeles to Kansas City would set you back $68, or about $575 adjusted for inflation. Today, if you book two weeks out, you can get that same one-way flight for $183 on Alaska Airlines (according to a Travelocity search I just did). You'll also get there in 3 hours and 11 minutes, compared with TWA's 1955 quoted time, which is 5 hours. However, today's time-sucking dance of security theater probably makes that two-hour savings a wash.

I've included a scan of the prices from the TWA ad below, along with some inflation adjusted numbers under that. Remember that these are one-way ticket prices and don't reflect the price of getting home, which could be higher than the price to get you to your first destination.

Air Travel Today is a Damn Bargain

Domestic Rates

  • Los Angeles to Kansas City — $68 in 1955, $575 adjusted for inflation
  • Chicago to New York — $33 in 1955, $279 adjusted for inflation
  • San Francisco to Chicago — $76 in 1955, $643 adjusted for inflation
  • Boston to Los Angeles — $106 in 1955, $896 adjusted for inflation
  • Kansas City to New York — $52 in 1955, $440 adjusted for inflation
  • Pittsburgh to San Francisco — $96 in 1955, $812 adjusted for inflation
  • Las Vegas to Los Angeles — $13.70 in 1955, $116 adjusted for inflation
  • Phoenix to Chicago — $69 in 1955, $584 adjusted for inflation
  • Amarillo to Kansas City — $22 in 1955, $186 adjusted for inflation
  • New York to Columbus — $23.90 in 1955, $202 adjusted for inflation
  • Washington, D.C. to Kansas City — $46 in 1955, $389 adjusted for inflation
  • St. Louis to Los Angeles — $73 in 1955, $617 adjusted for inflation
  • Wichita to Philadelphia — $68.55 in 1955, $580 adjusted for inflation
  • New York to Pittsburgh — $16 in 1955, $135 adjusted for inflation

International Rates (all from New York)

  • Paris, France — $310 in 1955, $2,622 adjusted for inflation
  • Rome, Italy — $360.20 in 1955, $3,046 adjusted for inflation
  • Frankfurt, Germany — 328.10 in 1955, $2,775 adjusted for inflation
  • London, England — $290 in 1955, $2,453 adjusted for inflation
  • Madrid, Spain — $320.30 in 1955, $2,709 adjusted for inflation
  • Shannon, Ireland — $261 in 1955, $2,207 adjusted for inflation
  • Lisbon, Portugal — $296 in 1955, $2,503 adjusted for inflation
  • Geneva, Switzerland — $328.10 in 1955, $2,775 adjusted for inflation

So why has air travel become so relatively cheap? The answer can be found in fewer amenities (remember when meals and things like checking a bag didn't cost extra?), the cramming of more seats into planes, and the rise of non-union carriers.

This all raises questions about the transportation technologies of tomorrow. If you're under the age of 30, not much about transportation has changed that radically in your lifetime — aside from the price! Will Elon Musk's new much-discussed Hyperloop tech deliver that cool new futuristic mode of transportation we've been waiting for? And if so, can it be done at a price average Americans can afford?

Of course, we see air travel as essential to the American economy today. So much so that most Americans figured it was a no-brainer to bail out the industry after the September 11th attacks. But it's also become commoditized, a mundane and irritating chore that's far from the futuristic luxury it was sold as in the 1950s. That's the trade off for relatively affordable accommodations. And the price of any futuristic transportation, along with the political savvy of its boosters will determine its fate in these decades to come.

Image: scanned from the May 27, 1955 issue of Collier's magazine

Reply