From the Jon Bonne' MSNBC Story:
The new sales notion, to market a Tourate or Conditional Passage,
faced more than a bit of skepticism: Sell cheaper airline tickets to passengers who wouldn’t pay for a full-fare, full-service ticket. There was, of course, one big caveat: It had to be made clear to these passengers that they were getting a second-class ride. The year was 1939. Sixty-four years later, airlines and their customers have rediscovered a crucial if obvious notion: Value is in the eye of the beholder.
To complicate matters, even as that model finally sinks in with the flying public, upstarts like JetBlue have raised the ante by offering extra perks leather seats, satellite TV while hewing to a low-fare mandate. It’s one of those situations where for a lower price you get a better product, which is really hard to compete with, says Alex Wilcox, who runs JetBlue’s western operations out of Long Beach, Calif.
When you start looking at the comparison ... what’s the difference between Southwest and USAir? Well, it’s a reserved seat, mainly, says Clinton Oster, an Indiana University economist who has studied airline pricing for the Department of Transportation. If I’m only on the airplane for an hour, hour-and-a-half, how much difference can it make?
When you have a first-class cabin and when you have perks for people who pay higher fares for thatsays one airline pricing analyst, even the people who pay $99 say, ‘I want that.’
"Wouldn't your boss like to fly home nonstop at 4:30 on a Friday afternoon?" -Airline Exec to Congressional Staffer