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Business Class Cost!  
User currently offlineBringiton From United States of America, joined Sep 2006, 866 posts, RR: 0
Posted (7 years 9 months 2 weeks 2 days 18 hours ago) and read 4664 times:

Why is buisness class so much more expensive as opposed to Economy class ? I was checking out BA for ticket prices to go to LHR from JFK and the cost difference was huge b/w buisness and economy . Can we equate this in any way for eg - how much more space does a buisness class seat take as opposed to economy ? How many more FA's per passenger ( fraction ) etc etc !!

32 replies: All unread, showing first 25:
 
User currently offlineStar_world From Ireland, joined Jun 2001, 1234 posts, RR: 0
Reply 1, posted (7 years 9 months 2 weeks 2 days 18 hours ago) and read 4626 times:

Working it out that way will result in some difference, but will not come close to accounting for the gap. The reason it's so high is that is what the market will tolerate on routes like this. BA operate 10 flights a day between the UK and New York, and it's one of their busiest premium routes - it can often be hard to get a seat in business class. From a business point of view for the airline it makes complete sense, you price the product at the upper end of what the market will pay.

As a perfect example of this, try setting the originating location to somewhere like AMS or LIS on the BA.com site (leave the destination as JFK) and look how dramatically lower the prices are. This is because a passenger starting in AMS has other options to get to the US, and BA prices its offering to attract customers like this too. You can end up in an identical seat, on an identical flight for the longhaul portion (eg: if you flew AMS-LHR-JFK) but yet pay 25% of what the UK-originating passenger paid!

What you'll also find is that for many other routes around the world, the difference between economy and business is much smaller. LON-NYC is probably one of the more "inflated" ones due to the huge amount of business travellers .


User currently onlineViscount724 From Switzerland, joined Oct 2006, 24817 posts, RR: 22
Reply 2, posted (7 years 9 months 2 weeks 2 days 17 hours ago) and read 4613 times:

The short answer is because people are willing to pay those high fares. If they weren't, the fares would come down. But as long as you can fill your premium seats at $3000, you're not going to want to charge $2000.

There are of course numerous cost-related reasons for higher business class fares but there's rarely any direct connection between economy and premium class fares. It's largely a matter of supply and demand and charging what the market will bear.

Fortunately for the airlines, but unfortunately for their customers, the UK and LON in particular is one of the world's strongest origin/destination business travel markets, and has long resulted in the less-price sensitive premium fares being significantly higher than many other points in Europe. That's not likely to change anytime soon.


User currently offlineDstefanc From United States of America, joined Dec 2001, 63 posts, RR: 3
Reply 3, posted (7 years 9 months 2 weeks 2 days 17 hours ago) and read 4547 times:

There is one more thing to add. The reason that Business Class seats are so expensive is because the Economy seats are so cheap. The airline must compensate somehow with the low cost of economy seats, and it does so by charging more for business class. Back in the day the difference was much smaller, because economy seats used to cost much more than today.

D


User currently offlineA3 From Greece, joined Oct 2006, 262 posts, RR: 8
Reply 4, posted (7 years 9 months 2 weeks 2 days 10 hours ago) and read 4389 times:

Quoting Viscount724 (Reply 2):
The short answer is because people are willing to pay those high fares. If they weren't, the fares would come down. But as long as you can fill your premium seats at $3000, you're not going to want to charge $2000.

So true!!!

I still wander what is the average load factor.
I know that economy offered seats are about 85% .
If it is more than 50% I think that the prices will remain High.



Don't spend your money on airlines that don't respect your business.
User currently offlineTheSunseeker From Netherlands, joined Apr 2006, 218 posts, RR: 0
Reply 5, posted (7 years 9 months 2 weeks 2 days 7 hours ago) and read 4303 times:

Passengers are willing to pay those large amounts because they arrive relaxed.
Simple example: you fly from London to New York for a 6h meeting in Economy,
you will need to stay there for a night because otherwise you will basicly die :p

Take the same trip in business class, you will arrive relaxed and be able to fly home straight after the meeting. Means you can be back at work "at home" fresh the next day.

Thats why there will always be people willing to pay the price.
They arrrive more relaxed, so they need less time to recover from a flight,
means they can work more  Smile



RSA: Dont drink and drive - take the train and get mugged
User currently offlineStarlionblue From Greenland, joined Feb 2004, 16993 posts, RR: 67
Reply 6, posted (7 years 9 months 2 weeks 2 days 7 hours ago) and read 4285 times:

Quoting Bringiton (Thread starter):
Why is buisness class so much more expensive as opposed to Economy class ? I was checking out BA for ticket prices to go to LHR from JFK and the cost difference was huge b/w buisness and economy . Can we equate this in any way for eg - how much more space does a buisness class seat take as opposed to economy ? How many more FA's per passenger ( fraction ) etc etc !!

With your logic, cost should be the only basis of price. But you forget the role of supply and demand. These place the price at current level. The cost of the service does not.

The airline seeks to make a profit, not simply recoup cost plus a small markup. Also, as Dstefanc points out, Business class on many routes is the main money maker while Monkey class barely breaks even. If Business were not prices thus, Monkey would be more expensive.

Having flown Biz and Monkey over the pond numerous times, I would say that the difference in experience is vastly more than just the size of the seat and the food. Being able to stretch your legs out completely, not bumping into a neighbor, having a foot rest, getting a glass of wine, being able to go to the crapper without climbing over other pax, and so forth, enables you to arrive somewhat refreshed and relaxed as opposed to tired and tense. If you have to work on arrival, this makes a huge difference.



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineTGV From France, joined Dec 2004, 874 posts, RR: 20
Reply 7, posted (7 years 9 months 2 weeks 2 days 4 hours ago) and read 4158 times:

Quoting Starlionblue (Reply 6):
With your logic, cost should be the only basis of price. But you forget the role of supply and demand. These place the price at current level. The cost of the service does not.

Basic principle of free market economy.

Quoting Star_world (Reply 1):
From a business point of view for the airline it makes complete sense, you price the product at the upper end of what the market will pay.

As a perfect example of this, try setting the originating location to somewhere like AMS or LIS on the BA.com site (leave the destination as JFK) and look how dramatically lower the prices are. This is because a passenger starting in AMS has other options to get to the US, and BA prices its offering to attract customers like this too.

This is also true for Eco fares.

So in the end the airline will charge less for a connecting flight (let's say JFK-LHR-AMS) than for the direct flight WHICH IS IS A PART of the connecting flight (JFK-LHR).

This means that you will pay less for something more expensive to produce (from the airline point of view, they have to accommodate you on the connecting flight), and worst for the environment.

A perfect example of why free market economy HAS to be regulated, especially for the environmental impacts.



Avoid 777 with 3-4-3 config in Y ! They are real sardine cans. (AF/KL for example)
User currently offlineGeorgiaAME From United States of America, joined Aug 2005, 954 posts, RR: 6
Reply 8, posted (7 years 9 months 2 weeks 2 days 3 hours ago) and read 4108 times:

It is called a "market economy" They charge what the economic market is willing to bear. Of course the prices are absurd! But silly people, me included, are willing to pay for the amenities.

As proof of the invisible hand of the economic market, you may wish to explore several web sites for Business class sales. There are multiple airlines with an "I" fare, which greatly discounts the seat to about $2500 rt between the US and Europe. (Rather than, say $6000 rt) You pay 50-60 days in advance, essentially have the same restrictions on the ticket that you would have on a 14-21 APEX economy fare, but you do fly business. CO has been running a fall sale for the past several years for about $1200 rt. They know in advance that the seats won't sell at the stratospheric prices, they are discounted and filled.

I think the real question should be, why do some carriers continue wasting valuable aircraft volume on First Class seating, which no one ever pays for, when that space could be generating Business Class revenue? This is one lesson Delta really got right in 1998 when they introduced their Business Elite product. (Which alas, really needs a major overhaul for the price they charge)



"Trust, but verify!" An old Russian proverb, quoted often by a modern American hero
User currently offlineFbgdavidson From United Kingdom, joined Oct 2004, 3700 posts, RR: 28
Reply 9, posted (7 years 9 months 2 weeks 2 days 2 hours ago) and read 4044 times:

In short the difference between Economy pricing and Business Class down to price elasticity of demand. I suggest Googling it, but in short it reflects the proportional rate at which demand is influenced by raising and lowering prices. This of course ties in with supply and demand.

The PEd is rather different between J and Y. A larger proportion of Y travellers in the back are price driven (i.e. cheapest ticket available). So increase prices by 10% and you lose 15% of your customers. OTOH, Business class is more product driven and a 10% increase may mean you only lose 5% of your customers. This was certainly more marked in the 90s when a higher proportion of companies were paying for J longhaul.

You could also tie in the influence of corporate policies...the Fortune 100 company I work for has a list of four preferred airlines with whom we have discounted rates. If we fly with another airline we get taken to the cleaners. The numbers of people flying within the company mean the airlines win easily even on discounted rates, knowing we are over a barrel somewhat with our corporate policy.

Quoting GeorgiaAME (Reply 8):
I think the real question should be, why do some carriers continue wasting valuable aircraft volume on First Class seating, which no one ever pays for, when that space could be generating Business Class revenue?

On a logistical front it sometimes isn't possible to replace the F cabin with more J seats. One that springs to mind is the F suite products in the nose of the 747. Because of the shape of the nose you can't get that many more J seats in than you can F seats. A fair number of routes are filled with fare-paying passengers in F class, especially on airlines with a decent F product that you can't use stickers or vouchers to upgrade into  Wink



"My first job was selling doors, door to door, that's a tough job innit" - Bill Bailey
User currently offlineRdwootty From United Kingdom, joined Sep 2005, 902 posts, RR: 2
Reply 10, posted (7 years 9 months 2 weeks 2 days 2 hours ago) and read 4021 times:

If you are going to do this then what about the STN option? Maxjet is " old Style" business class and EOS is more upmarket and both are lower than the old codgers at LHR

User currently offlinePa201 From United States of America, joined Apr 2005, 33 posts, RR: 0
Reply 11, posted (7 years 9 months 2 weeks 1 day 19 hours ago) and read 3711 times:

Also, the vast majority of business class seats are filled by corporate business travelers whose companies enjoy discounts of 20,30, even 40% via their contracts with the airlines. Only a small amount of business class seats are occupied by travelers paying the actual published full fare.

User currently offlineGuyBetsy1 From Canada, joined Aug 2001, 839 posts, RR: 6
Reply 12, posted (7 years 9 months 2 weeks 1 day 19 hours ago) and read 3661 times:

Quoting Bringiton (Thread starter):

Have you looked at the fare for First Class?


User currently offlineStarlionblue From Greenland, joined Feb 2004, 16993 posts, RR: 67
Reply 13, posted (7 years 9 months 2 weeks 1 day 17 hours ago) and read 3262 times:

Quoting TGV (Reply 7):
This means that you will pay less for something more expensive to produce (from the airline point of view, they have to accommodate you on the connecting flight), and worst for the environment.

A perfect example of why free market economy HAS to be regulated, especially for the environmental impacts.

What makes you think regulation would improve things? If you take the extreme of regulation on a decent scale, Soviet Russia, you can see how well that went. Environmental, social and economic disaster.

I'm not against some regulation in principle. I'm against the unregulated application of regulations.  Wink One needs to be very very careful introducing imperfections in the market.

Quoting GeorgiaAME (Reply 8):
I think the real question should be, why do some carriers continue wasting valuable aircraft volume on First Class seating, which no one ever pays for, when that space could be generating Business Class revenue?

By "no one ever pays for" I presume you mean everyone ugrades into it? First of all, automatic upgrades are pretty much a North American phenomenon, even with US carriers. On international flights (outside NA) for American, for example, upgrades to status travelers are only given if the original class is full. Also, an upgrade or a reward is hardly a loss for the airline. Bonus programs are big moneymakers. Finally, plenty of people do actually pay those F fares, whether full or discounted.



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineElite From Hong Kong, joined Jun 2006, 2793 posts, RR: 10
Reply 14, posted (7 years 9 months 2 weeks 1 day 10 hours ago) and read 3144 times:

For example there are bigger seats, better IFE and the food is better... when you see how many Business class seats there are and how many economy seats can be added in the place of the business class seats, the price evens out.

User currently offlineStarlionblue From Greenland, joined Feb 2004, 16993 posts, RR: 67
Reply 15, posted (7 years 9 months 2 weeks 1 day 6 hours ago) and read 3042 times:

Quoting Elite (Reply 14):
For example there are bigger seats, better IFE and the food is better... when you see how many Business class seats there are and how many economy seats can be added in the place of the business class seats, the price evens out.

I don't agree. Even if you could put 4 economy seats in place of one biz (you cannot) the biz seat tends to cost more unless you're talking full fare economy,



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineJumbojet From United States of America, joined Dec 2003, 1159 posts, RR: 0
Reply 16, posted (7 years 9 months 2 weeks 1 day 3 hours ago) and read 2936 times:

Quoting Pa201 (Reply 11):
Also, the vast majority of business class seats are filled by corporate business travelers whose companies enjoy discounts of 20,30, even 40% via their contracts with the airlines. Only a small amount of business class seats are occupied by travelers paying the actual published full fare.

This is 100% correct information. And to ad to that you then have the frequent fliers or platinum medallion members (In DL's case) that get the upgrade certificates that allow upgrading to a business class seat when you purchase a coach seat in Y,B, or M class.

business class seat without discount from JFK to MAD costs $4,000

same seat for PM member upgrading from M is $1,600.00

and a deeply discounted coach seat on same flight sells for $660.00


User currently offlineTGV From France, joined Dec 2004, 874 posts, RR: 20
Reply 17, posted (7 years 9 months 2 weeks 1 day 2 hours ago) and read 2928 times:

Quoting Starlionblue (Reply 13):
What makes you think regulation would improve things? If you take the extreme of regulation on a decent scale, Soviet Russia, you can see how well that went. Environmental, social and economic disaster.

I'm not against some regulation in principle. I'm against the unregulated application of regulations. Wink One needs to be very very careful introducing imperfections in the market.

Since the totally free market leads to the global stupidity I mentioned (and for me this shows that the market alone is imperfect in itself), we need something to help it to give more acceptable results.

I am not advocating a Soviet style system, of course.
But some regulations that would help the market to consider not only the private companies short term profits, but also global consequences of their activities.



Avoid 777 with 3-4-3 config in Y ! They are real sardine cans. (AF/KL for example)
User currently offlineBayAreaPilot From United States of America, joined Nov 2004, 73 posts, RR: 0
Reply 18, posted (7 years 9 months 2 weeks 1 day ago) and read 2854 times:

Quoting TGV (Reply 17):
Since the totally free market leads to the global stupidity I mentioned (and for me this shows that the market alone is imperfect in itself), we need something to help it to give more acceptable results.

So any pricing scheme you don't like is imperfect and stupid? How exactly do you propose to find the "perfect" price?


User currently offlineTGV From France, joined Dec 2004, 874 posts, RR: 20
Reply 19, posted (7 years 9 months 2 weeks 21 hours ago) and read 2765 times:

Quoting BayAreaPilot (Reply 18):
So any pricing scheme you don't like is imperfect and stupid? How exactly do you propose to find the "perfect" price?

I don't know if you read my initial post when I was saying:

Quoting TGV (Reply 7):
So in the end the airline will charge less for a connecting flight (let's say JFK-LHR-AMS) than for the direct flight WHICH IS IS A PART of the connecting flight (JFK-LHR).

This means that you will pay less for something more expensive to produce (from the airline point of view, they have to accommodate you on the connecting flight), and worst for the environment.

I am in no way an economist, but for me, a system in which the price of something is not connected to its cost (selling cheaper two flights than one of the two flights) is something which is not logical.
And this is even before taking into account the indirect cost of environmental nuisances.

So I let economist design an adequate pricing system, integrating all aspects, and not only some private companies short term profits.



Avoid 777 with 3-4-3 config in Y ! They are real sardine cans. (AF/KL for example)
User currently offlineStarlionblue From Greenland, joined Feb 2004, 16993 posts, RR: 67
Reply 20, posted (7 years 9 months 1 week 6 days 1 hour ago) and read 2604 times:

Quoting Jumbojet (Reply 16):
This is 100% correct information. And to ad to that you then have the frequent fliers or platinum medallion members (In DL's case) that get the upgrade certificates that allow upgrading to a business class seat when you purchase a coach seat in Y,B, or M class.

This only applies to some airlines. As a rule, you only get auto-upgraded on intercontinental if your class of service is full or if you use your limited supply of upgrade certificates.

Quoting TGV (Reply 17):
Since the totally free market leads to the global stupidity I mentioned (and for me this shows that the market alone is imperfect in itself), we need something to help it to give more acceptable results.

I am not advocating a Soviet style system, of course.
But some regulations that would help the market to consider not only the private companies short term profits, but also global consequences of their activities.



Quoting TGV (Reply 19):
I am in no way an economist, but for me, a system in which the price of something is not connected to its cost (selling cheaper two flights than one of the two flights) is something which is not logical.



Quoting TGV (Reply 19):
So I let economist design an adequate pricing system, integrating all aspects, and not only some private companies short term profits.

This economist is cringing. I would agree that the capitalist system breaks down when large projects with long payback timescales (e.g. Eurotunnel) are involved since private investors can make the same money by investing several times shorter term with less risk.

However, I am loath to give control of this sort of thing to "someone". The results speak for themselves. "Free market" economies are the most powerful in the world, with the richest inhabitants per capita, BECAUSE they are free. Socially acceptable or not, a large spread between the richest and poorest is in many ways beneficial.

Removing "excess profits" from companies is punishing them for succeeding in creating value for their shareholders. This simply means they will have less of an incentive to do well, or more likely just move profits overseas. Either way is bad.

The best thing is provide a consistent environment and not mess with it unless something is blatantly broken. Government is notoriously bad when they try to "fix" the market. The problem being that legislators tend to be just as short sighted and parochial as corporations. Any assumption that they look at the long-term good of the entire country/state/city is flawed.

I'm not saying capitalism is perfect. It is deeply flawed in many ways. However it's better than the rest of them. To paraphrase Churchill: "Capitalism is the worst possible system, except for all the other ones."



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineTGV From France, joined Dec 2004, 874 posts, RR: 20
Reply 21, posted (7 years 9 months 1 week 5 days 18 hours ago) and read 2464 times:

StarlionBlue,

I have to agree with a lot of what you wrote about capitalism.

My problem is how to integrate in this "less bad system" elements that are not taken into account by it.
Take environment, which is for me an important problem (considering the moral obligations we have with our children or grandchildren).

There are not many examples of firms voluntarily integrating in their production process environment friendly measures, if these measures cost something to them: obligations have to be imposed by a higher authority, the state or whatever you will call it. And there is a good reason, why would some companies choose to support a higher burden than their competitors? It is not in their own interest.

The only way is to have everybody be forced to comply. And to do so the only way is to regulate (intelligently, here begin the difficulties).

But I would be interested if you have a different solution.



Avoid 777 with 3-4-3 config in Y ! They are real sardine cans. (AF/KL for example)
User currently offlineSllevin From United States of America, joined Jan 2002, 3376 posts, RR: 6
Reply 22, posted (7 years 9 months 1 week 5 days 8 hours ago) and read 2374 times:

Two things:

1) A business seat takes up about 3x the space of a coach seat;

2) because of that, business inventory is much more tightly controlled, so you don't find many super deep deep discounted fares being offered.

If you compare business class fares to more mid-range coach fares, you'll find the differential on them is much less.

Steve


User currently offlineN1120A From United States of America, joined Dec 2003, 26361 posts, RR: 76
Reply 23, posted (7 years 9 months 1 week 5 days 8 hours ago) and read 2352 times:

Quoting Starlionblue (Reply 6):
The airline seeks to make a profit, not simply recoup cost plus a small markup.

Actually, you just described a profit.

Quoting Starlionblue (Reply 6):
Also, as Dstefanc points out, Business class on many routes is the main money maker while Monkey class barely breaks even. If Business were not prices thus, Monkey would be more expensive.

How about not using such an insulting pegorative as monkey in relation to economy class?



Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
User currently offlineStarlionblue From Greenland, joined Feb 2004, 16993 posts, RR: 67
Reply 24, posted (7 years 9 months 1 week 5 days 6 hours ago) and read 2296 times:

Quoting TGV (Reply 21):
But I would be interested if you have a different solution.

I wish. And so do many other people. "Intelligent regulation" is the big problem facing modern governments. Rregulating based on voter (and sometimes media AKA perceived voter) pressure is relatively easy in the short term. And so you get an insecure environment in which companies and individuals have no idea what will happen next. "Should I save or spend? Should I re-invest or cash out?" Crucial questions important for the economy in general.

I would also like to see more focus on environmental issues. However unchecked environmental legislation in the short term could be bad for the economy in the short time. Long term planning, for example gradually raising pollution taxation over 10 years, ensures both positive environmental impact and fewer hiccups for the economy. However, politicians need to be reelected every 3-5 years, so their planning horizons are not long enough. After three years they lose patience and start thinking about re-election. Enter populism.

There is something to be said for non-elected power, at least for part of government. An aristocracy is much more concerned about the long term and in theory not as subject to short term pressures. Another option would be having one houses elected for 20-25 years at a time and the other for 5. In any case the longer term needs somehow to be taken into account.

I am not really optimistic, however. Politicians have a stronger incentive to be re-elected than to do something truly statesmanlike because the rewards for the former outweigh the ones for the latter. Call me a cynic.

Quoting N1120A (Reply 23):
Quoting Starlionblue (Reply 6):
The airline seeks to make a profit, not simply recoup cost plus a small markup.

Actually, you just described a profit.

Sure. But far from all are simply markups like that. If they were, the economy would be pretty stagnant.

Quoting N1120A (Reply 23):
How about not using such an insulting pegorative as monkey in relation to economy class?

Choose to be offended if you like. I call it humor. And for the record I fly Monkey Class all the time. After all, we share 99% of our DNA with many apes.  Wink

[Edited 2006-10-18 13:35:54]

[Edited 2006-10-18 13:36:13]


"There are no stupid questions, but there are a lot of inquisitive idiots."
25 Nudelhirsch : This cannot be serious...
26 Lufthansa : TVG.. I'd like to point something else out. The concept of yeild management is also related. You explained that it was basically bad because it lead t
27 Mptpa : Like you said, if you put this in an economics sense, it goes like this... There are diferent types of customers hose demands are dissimilar: the cut
28 Post contains images Starlionblue : Kudos to Mptpa for explaining it in microeconomic terms. I'm getting serious university flashbacks.
29 Post contains images TGV : First of all, your example of selling a seat at the last minute and with a discount price to avoid have it flying empty is a very specific case. In t
30 YULWinterSkies : Why, as soon as someone is introducing the word "regulation". someone else has to jump into the other extreme to say that regulation should not be th
31 Lufthansa : Bingo! This was my point exactly. I mean if we all booked at roughly the same time in advance, and all filled the aircraft at equal levels of demand
32 N1120A : We are apes, but that is behind the point.
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