Summary of The Economics of Airline Class

Wendover Productions

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Do you fly first-class or squeeze into coach? Until the 1950s, you had only one choice. Wendover Productions explains the evolution of airfares using engaging illustrations that blend simple math with historical context. getAbstract recommends this fascinating case study to anyone interested in travel, pricing or the history of business.

In this summary, you will learn

How airlines tier their offerings to attract a broad clientele,
How current airfares evolved and
What factors influence ticket prices.

About the Speaker

Wendover Productions publishes short educational videos that aim to explain how the world works.

Summary

Premium, not economy, passengers are airlines’ most lucrative patrons. Consider a round trip aboard a British Airways Boeing 777 from London Heathrow to Washington Dulles. Of the 224 seats on board, 122 economy tickets sell for $876 each, generating $106,872 in revenue; 40 premium-economy tickets sell at $2,633 each, making $105,320; 48 business-class tickets cost $6,723 each, earning $322,704; and 14 first-class tickets go for $8,715 each, bringing in $122,010. Thus, 14 first-class passengers produce more revenue than 122 economy travelers. The three high-end classes, or 45% of passengers, deliver 84% of income. This is an oversimplified model. In reality, consumer prices rely on many...

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