Airline travel is far from convenient, but the only way to travel long distances in a shorter amount of time. With the continuous rise in prices, however, one must look at the opportunity cost of choosing the airport. There are so many hidden fees now married with the increase of a plane ticket, and not many travelers stop to think about the price of a single ticket. Below is a comparison of two major airlines: American Airlines and Southwest Airlines. The chart shows the price for a round trip ticket with some additional fees that may be incurred during the travel.
It is assumed a single individual is traveling with two bags, both within the standard weight limit set by the airlines with no pets. It is also assumed that the reservations are made online (which avoids the $20 fee for a phone reservation by each company). The data comes from each airlines website for a round-trip ticket from Dallas to Los Angeles.
The departure date was set for two weeks from the access date with the return date set five days after the departure. The standard deviation is given; meaning 68% of the data would fall within one standard deviation either way.
The two charts show that the lowest ticket price may not be the lowest cost to fly. American Airlines did have the lower average cost of a ticket, but with the additional bag charge, not present in Southwest Airlines, the two airlines drew closer. Prices would continue to increase with extra bags, or even heavier bags.
The cheapest flight offered was offered once, maybe twice in a day, so the traveler is handcuffed on when to travel if searching for the lowest price. This is when a customer must choose an airline with some additional information. Southwest Airlines seems to dominate the additional charges category with lower prices for options like more bags, overweight bags, or better (first class) seating. Even the option for a pet has a fee attached to it. The individual is therefore forced to make a decision based on the perception of value and the extra fees that may apply to him or her.
Each airline is full of these additional charges to generate revenue. Airlines can utilize items like food or drink to increase profits even further. There have also been instances of airlines partnering with hotels for a percent of their revenue when one of airline travelers book a hotel through the airline. The airline business is just that – a business. It is understandable that these airlines need to generate revenue and, ultimately, create a profit. It seems fascinating, however, that the only way to do so is to average $300 a ticket per flight. Southwest Airlines has approximately 3,400 flights per day, with around 115 individuals per flight (full capacity is around 170). At $250 a ticket that is $97,750,000 per day in revenue. And this is being generous! Looking at my charts above, an individual would be lucky to escape with a total charge of $250.
The study of the cost of running an airline is a discussion for another paper, but it is easy to assume $100 million dollars a day could cover it. In the end, the airlines are able to do this because of demand. Individuals want to get home to see family, or make it to the business conference quickly. The demand is there, and the airlines are simply staying competitive with the other airlines. One thing is for certain though, in order to find the best deal, one must do the research.