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A minor cure for our envy
...domestically it’s more likely that those middle managers flying incessantly are the ones who will be sitting up front rather than their bosses, as roughly 90% of domestic first class seats are upgrades awarded to frequent flyers rather than paid first class tickets.
That's from Air Genius Gary Leff.
Posted by Tyler Cowen on July 25, 2008 at 05:01 PM in Data Source | Permalink
Comments
Hmmm.... Doesn't this mean that first class is over priced? Wouldn't people be willing to pay more than 10% for the additional comfort?
Posted by: aaron at Jul 25, 2008 5:13:56 PM
Why are those middle managers flying around so much? Maybe they're doing a lot more to keep activities within the firm synchronized than we are usually led to believe by tree-like organizational charts. Maybe firms are more densely connected through middle managers than any organizational chart can capture.
Posted by: Michael F. Martin at Jul 25, 2008 6:01:54 PM
aaron,
I don't follow your reasoning. Presumably 10% is the number of first class seats that are actually sold at face value. That sounds realistic to me considering how overpriced they are (to me at least).
Of course, the airline is most likely making a profit based on the 10% sold at full price, enough to cover the material costs of the upgrade. They also help engender customer loyalty from those they give out the favors to.
Posted by: anomdebus at Jul 25, 2008 7:01:01 PM
I'm not jealous of people in first class. I get jealous when I go to Barnes & Noble and see all the economists with best selling titles.
Posted by: Bob Murphy at Jul 25, 2008 9:29:43 PM
If this is true, it might explain why Southwest is so successful even though it doesn't offer first class.
Posted by: Will Luther at Jul 25, 2008 9:33:21 PM
um, sounds like it could be thatthose bosses fly less than their middle managers do. that sure sounds like something to envy to me.
Posted by: mouse at Jul 25, 2008 10:17:43 PM
I'm not sure that the bosses fly less than the middle managers, although I suspect they do less of the regular Monday to Thursday or Monday to Friday commutes that are pretty common. On which point, lower prices tend to drive a wedge between interests of the middle managers and their employers, as they encourage employers to ask for these schedules and the time away from family and friends is a much more important downside than losing a few inches in coach.
Posted by: jonm at Jul 25, 2008 10:28:13 PM
you poor ignorant proles. bosses don't fly firstclass, they have gulfstreams
Posted by: aregkjetkj at Jul 26, 2008 3:56:04 AM
Or the bosses do not fly commercial.
Posted by: J. Bogart at Jul 26, 2008 9:50:34 AM
Are the classes holdovers from when pricing was regulated, a sort of value discrimination in lieu of price discrimination?
Managers spend company money with impunity, occasional cost-cutting mania notwithstanding. But some companies might raise an eyebrow at buying a first-class ticket. So, the solution is that the loyal customers buy business and with a wink and nod get to fly first class. Another way to pay up is of course to buy direct flights.
Posted by: Andrew at Jul 27, 2008 2:57:44 AM
"it might explain why Southwest is so successful even though it doesn't offer first class."
Southwest is so successful because they've learned how to keep costs well below those of the competition. It's not just their fuel hedges that gives them a competitive edge. In fact, it was Southwest's profitability during the post-9/11 downturn that provided the cashflow to hedge when others could not.
Southwest's critical success factor is the ability to turn aircraft faster at the gate. This enables Southwest to maximize the utilization of both capital assets and expensive human resources (pilots).
Posted by: John Dewey at Jul 28, 2008 2:14:14 PM
Maybe I've just been looking at too many LSAT books, but the quote here doesn't say what the author seems to think it does, or rather the first part doesn't follow logically from the second. The factual information is that of every 100 first class seats, 90 are given to those with frequent flyer miles, and we are assuming that middle managers have more frequent flyer miles than their bosses. However, the conclusion isn't directly related to that information, since it goes in the other direction. It could quite well be the case that the boss has a higher likelihood of sitting in first class (since likelihood is now what percent of flights taken are spent in first class) than the middle manager, since I'm guessing the ratio of bosses to middle managers is below 1:9. This is a bit of a simplification, but the general point remains the same- people should be VERY precise and careful when presenting statistics and drawing conclusions from them.
Posted by: econgirl at Jul 29, 2008 1:49:53 PM
