What's Wrong with the Airline Industry
Matthew Martin 2/22/2013 05:00:00 PM
Alright. I work at Cornell University, but I live part-time in the suburbs of Cincinnati. I often need to travel from the one to the other. As an economist, of course, my immediate consideration is to solve for the cost-minimizing way to make this trip. Lets compare two of the options: driving versus flying. Now, costs are not the only consideration--I also need to take into account preferences over time and over, say, the utility of having a car. Time preferences mean that I'd be willing to pay a bit more for the faster method. On the other hand, cars involve both costs and preferences (buses aren't free) but the general idea is that I'd be willing to pay a bit more in order to be able to have a car once I reach my destination.
Lets start with the benchmark case: driving. Cornell is in Ithaca, New York (which is to say, middle of nowhere), and I'm headed to somewhere in Cincinnati. My car gets 35 mpg, sometimes better on the open highways. So, at 4 dollars per gallon of gas, my round-trip costs 124.34 dollars, and takes 9 hours each way, if you include plenty of time to stop for gas, food, and whatnot.
Ok, Cincinnati has a pretty large international airport (CVG). On the other end we have the tiny Tompkins County airport, which is barely big enough to land a small commuter jet. The cheapest round trip flight from Tompkins County to Cincy (including drive times/costs to and from the airport) costs 516 dollars, and involves 11 hours of travel time one-way, not including the time it takes to go through airport security, baggage etc. Oh, and here's my favorite part--it goes to Cincy by way of Philadelphia and Chicago:
Ok, ok. Syracuse is the next closest city to Ithaca. It's a five hour flight plus two hours for security/baggage, plus two hours getting to/from various airports, each way. I've checked and this is the fastest, cheapest place in the area for me to fly from. Total cost: 542 dollars, 18 hours to fly, versus 125 dollars 18 hours to drive. Hmm. And this is the best the airlines can do folks. Oh, and my favorite part:
From my perspective I can travel the country a high speeds and low costs if I drive. Flying costs four times as much, and saves no time. Oh, and it leaves me stranded without a car. So my question is, who are these suckers paying through the nose for airplane tickets?
As a final thought, I will make a suggestion about what the airline industry should look like. I know a few recreational pilots. According to them I could pick up a reasonably fast Mooney at the price of a full-size car, and get from my hometown in the suburbs of Cincy straight to Ithaca in about 4 hours, with fuel and other costs not terribly different than driving. 4 hours! The passenger-jet-oriented airline industry quadruples costs and doubles travel times relative to a decentralized system in which people own small planes the way people own cars. So, part of me secretly hopes that the airline industry finally succumbs to its perennial unprofitability and crashes, letting a real airplane industry takeoff from its smoldering remains.