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Airlines’ favourite new pricing trick

Airlines have long been champions of price discrimination. To fatten their notoriously slim profit margins, they have developed “fare fences”, based on factors like whether or not a trip spans a weekend, to charge higher prices to those willing to pay them, particularly business travellers.

In recent years airlines have grown ever more sophisticated in their pricing techniques. American carriers’ latest method of singling out business passengers, though, is strikingly simple—and has sparked outrage in the travel blogosphere.

In May Thrifty Traveler, a website about travel bargains, reported that America’s three big legacy airlines—American, Delta and United—had started charging higher per-person fares for single-passenger bookings than for identical itineraries with two people. Kyle Potter, the author, grumbled that the practice amounted to carriers “weaponis[ing] their fares” against solo travellers who “can’t clone themselves”. Brian Kelly of The Points Guy, another travel site, called it “greed getting out of control” and said that airlines were “asking for government intervention”. Although no airline has yet commented on the subject, Delta and United reportedly scrapped the practice amid the criticism.

To investigate further, The Economist turned to Serpapi, an automated interface to Google Flights, a fare database. For all direct domestic journeys on America’s three big legacy carriers, we downloaded one-way main-economy fares as of July 20th for one and two passengers to travel on Monday July 28th, choosing whichever flight had an airline’s cheapest single-passenger price for that route that day. We also pulled return fares—one the following Friday and the other on Saturday—for both one and two passengers. In total, we amassed 19,000 prices across 3,200 routes.

Delta has indeed abandoned the technique: its two-passenger price is always at least twice the fare for one. But American and United have persisted. Solo flyers who travel with them within the work week can end up paying more than everyone else, including solo travellers whose journey involves a weekend stay and those who travel with others, regardless of whether their trip stretches into a weekend.

American is deploying the technique the most enthusiastically. Whereas solo weekday travellers were charged at least 5% more on only 8% of United routes, that threshold was crossed on 57% of American’s. American makes most use of the practice on trips where it does not compete with Southwest, a low-cost carrier, notes @xJonNYC, a social-media user who reports on aviation, and on shorter routes.

On routes where American did price differentially, the cost per person of a two-traveller booking with a Friday return tended to be around one-third less than for a single passenger; prices converged with a Saturday return (see chart). For example, the cheapest flight from Greenville, South Carolina to Charlotte, North Carolina with a Friday return cost $811 for one passenger and $565 per person for two. With a Saturday return, the round-trip price dropped to $497 per person, regardless of party size.

By decrying this pricing tactic, travel writers may inadvertently have done their audiences a disservice. American’s rivals are not offering single passengers a better deal. When Delta and, to a lesser extent, United retreated from this strategy, they simply raised prices for multiple-passenger bookings to match their single fares. When it comes to airfares, sunlight can be a surprisingly poor disinfectant. ■

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