Why Air Travel Is So Cheap | So Expensive

Why Air Travel Is So Cheap | So Expensive

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Sixty years ago, air travel was far too
expensive for the masses. Book a flight between New York
and London on Pan Am in 1960, and you’d be paying somewhere around $300, or about $2,600, adjusted for inflation. But in 2019, you can catch the same flight for almost a tenth of the price. It looks like flying
has never been cheaper, but is that the real story? And how did we get here? The first scheduled commercial
flight took place in 1914. It had one passenger and was piloted by this guy, Tony Jannus. The flight was from St.
Petersburg to Tampa. What would have been a 12-hour train ride became a quick 23-minute trip. The flight proved that there was demand for scheduled aviation as transportation. Jannus is largely credited
with laying the groundwork for the modern aviation business, which has grown into a
multibillion-dollar industry. In 2018, there were an estimated 45 million flights worldwide, and the average fare for a
domestic flight in the US was $350. Now, $350 is hardly considered cheap, but take a look at this graph. Average ticket prices have
been steadily decreasing since 1980. In fact, tickets are close
to their lowest prices ever. But from 1950 to 1980,
flying was different. Before 1978, fares and routes in the US were closely regulated by
the federal government, and many routes had fixed minimum prices. Scott Mayerowitz: What
ended up happening is you got into a highly regulated industry where the federal government set the various routes that you could fly, set how much prices could be, and the airlines were
raking in the dollars. Narrator: The story across
Europe was slightly different, as most airlines were state-controlled and air travel was treated
as a public service. But in 1978, everything changed. Then President Jimmy Carter signed the Airline Deregulation Act, and the aviation industry
was open for business. Free from government regulation, airlines now had one
goal: to sell tickets. Mayerowitz: What really
happened after deregulation was just this massive fight. Airlines were doing
everything to get market share and not really looking at profitability. The theory was, the more
people we can get onto a plane, the more we can dominate the
market, the more we’re winning. But they didn’t really
look at it as a business where you needed, at the end
of the day, to make a profit. And as soon as you had one
little economic hiccup, a bit of a recession or
a spike in oil prices, that’s when airlines really start to fail. Narrator: At the same time, aircraft technology was also advancing, which made the planes more efficient. New wing technology was
implemented, such as winglets, which made planes more aerodynamic
and reduced flight times. Computer systems began to
replace older cockpit technology, making the planes less reliant on pilots. Shortly after planes got
computers, so did people, and pricing began to get
even more competitive. Websites like Expedia and Priceline, launched in the late ’90s, began to catalog all of the lowest prices. Budget-airline models were
able to thrive because of this, as consumers would regularly
click the cheapest prices. For many airlines, this
competition was unsustainable. Over the years, a lot of companies folded, merged, or absorbed one another. And today, the four largest US airlines control 80% of the market. One of these four, Southwest,
has a fleet of 753 planes, each of which has an average
of six flights per day. That’s about 4,000 flights a day. And while that may sound like a lot, that frequency is
decreasing across America. This is because something called
load factor is increasing. Mayerowitz: One of the key
metrics for the airlines is called load factor, and this
is basically your occupancy. How many seats do you have available and what percentage of
those are being sold or occupied by passengers. Narrator: Basically, that
means aircraft are flying at full capacity, or
close to it, more often. And this is good for airlines.
And for flyers, sort of. Airlines are able to keep fares low because most of the seats have been sold. Which isn’t always great for passengers. Ever been the last one on the plane and there’s no more
overhead luggage space? Or had no room for your legs because the seats are so close together? There are tons of budget
airlines around the world. Some of the more notable ones are Ryanair, Norwegian, Spirit, and Frontier. These companies usually charge extra for traditionally included amenities, like reserving your seat, while cutting costs wherever they can. Mayerowitz: This issue of cramming more passengers onto planes is happening all across the world. You look at a discount
carrier like Ryanair, based in Ireland but
flies all over Europe. They’re looking at putting
200 people on a Boeing 737. This is a plane that some airlines are still flying with 150, 160 passengers. That’s really, really crowded. But it maximizes profit. And when you fly in an
airline like Ryanair, you know exactly what you’re getting. Narrator: So, take that
$320 flight on Norwegian from New York to London. Need anything other than one
small piece of hand luggage? The fare jumps to $490. Want a refundable ticket
and two checked bags? Suddenly you’re at $1,379. That’s about $100 more than the inflation-adjusted 1977 price, which came with all those
extras included as standard and more legroom, too. And non-budget airlines have
seen the potential profit in this budget model. More and more airlines
are beginning to charge hidden fees on top of the ticket price, from checking baggage to
just choosing your seat. Find the right deals, though, and flying can be cheaper than ever, but that original price you saw advertised may be misleading, and the experience that you get these days might not be the most pleasant, as manufacturers continue to cut costs. But the world of bargain-budget
fares may not last. Aviation emissions are predicted
to possibly triple by 2050, and many countries have begun implementing stricter environmental taxes for flights. Mayerowitz: Overall, there’s
little that the industry can squeeze out of airfare right now. They’re gonna get much more
efficient with aircraft, and that’s gonna mean less fuel burning. But the cost of labor is
probably not gonna go down. You still need good, quality people to fly an airplane and
be your flight attendants and be there for your safety.

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100 Comments

  1. There are like 19,700+ airports in the United States right now. And 5,170 of these airports are open to the general public and 503 of them serve commercial flights
    It's getting cheap of course.

  2. Just don't fly international first or business class if you care about the world your children will live in. A single business class seat's share of the plane's carbon pollution is the same as driving an outrageous gas guzzling Hummer SUV for a whole year! First and Business class travel is simply evil.

  3. A logic of a beach vacation can be used? i mean beachs usually are more expensive at the summer that the others time of the years, can I say next year Japan air tickets gonna be more expensive next year (2020)

  4. Airlines are missing an opportunity with the term LOAD FACTOR. They should determine a metric for the weight of the average passenger and apply a tariff for people who exceed this when checking in.

  5. Airline: 100$ for a round trip from new york to maimi
    Me: buys it
    Airline: plus taxes and fees which equals to 1000 usd

  6. Me: Casually scrolling through YouTube
    Nobody:
    Literally nobody:
    Not even the aliens on Mars:
    Buisness Insider: Why air travel is so cheap: So Expensive
    Me:??????

  7. OK I think this channel is going crazy. First it was "why avocados are so expensive" and now "why air travel is so cheap" ? What title are you going to have next, "why Trump is the best ever president in the world"?

  8. Actually, it might be cheap for you Americans, but here in Central- Eastern Europe, it is much more expensive compared to our income. A flight from here to New York and back is almost a monthly salary of an average middle-class employee

  9. Don't the likes of the cheaper airlines get cheaper fuel to dump all kinds of poisons on Humanity aka Weather Modification aka GeoEngineering?!?

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