As long-time readers will know, I am a frequent flyer for work. I spend most weekends in an airport, and I know many of the cabin crew on my regular routes by name. In fact, I’ll be in an airport later today (which is probably why I’m writing this post). And recently, I’ve found myself talking about the economics of airlines at social get-togethers. And specifically, why we should be happy that the world has business class passengers.
What You Might Notice As You Board
There is nothing that incites class rage quite like a priority boarding queue. Every time I head down to the A gates in Johannesburg’s OR Tambo International, I watch people bristle as the business class passengers proceed to the front of the queue to board first. And as soon as the ground crew aren’t looking, people try to sneak in.
I know this because my frequent flyer program let’s me use the priority boarding queue, regardless of my class of travel. So I get grouched at by old ladies who are all appalled that I am boarding ahead of them.
Although, full confession: when I was only a casual flyer, with none of the priority-boarding privileges, I too would throw vicious glares at the priority-boarding line. Because how dare they.
But the problem is: business class passengers make economy class affordable.
Here’s a youtube clip you should check out (mainly for the first part about the fare breakdown by class):
How Business Class Pays For Economy Class
As they say in that clip, on most airlines, premium passengers account for two thirds of revenue.
To understand what this means, consider the following example:
- Let’s say that there is a cake, cut into ten slices.
- The cake costs $100, because it’s an expensive one.
- So each slice goes for $10.
- But let’s say that we determine that there are some people who are willing to pay extra to get the first slice. About $18 extra. That is: they’re willing to pay $28 to get the first slice.
- What does this mean for the other slices?
- The cost of each of the remaining slices goes down to $8.
- Which is a 20% saving for the rest of us.
And airlines do something similar. The premium cabins pay a whole lot more money per seat (a lot more than the cost of the ‘extra’ room relative to the traveller cabin seats). Which means that the airline uses the rest of the seats to cover overhead costs (rather than expecting those seats to generate profit).
So business class passengers on a plane mean that the rest of us get to fly on that plane for less.
A personal anecdote
The flight that always makes me think about this is the SAA Airlink flight from Johannesburg to Tete (in Mozambique). That flight definitely does not have a business class cabin. It has a general cabin, and one toilet*.
*Side note: I have been on this flight when that single toilet got blocked. It’s a flight that stands out in my memory for all the worst reasons.
A seat on that two hour flight often costs more than an economy class flight to Europe. The last time I flew, it cost more than a business class ticket from Johannesburg to Cape Town (a similar distance).
Of course, there are other factors in play.
But personal anecdotes aren’t meant to be perfect examples.
The point is that an aeroplane is one of the few places where you get to be directly subsidised by a rich person and/or a business-person’s employer.
So there’s no need for class rage.
Instead, have the satisfaction of knowing that part of your holiday is on someone else’s tab.
Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha. Also, check out the RA podcast on iTunes: The Story of Money.