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Interesting Airline Pricing

Summary:
I had an interesting experience with airline pricing in the last 2.5 weeks. About 2.5 weeks ago, I got on line with United, the airline I usually use to go to Winnipeg. (From there, I drive 3 hours to Minaki, Ontario.) I wanted to go to Winnipeg on or about July 9. But I got a surprise. The airline literally wouldn’t let me reserve anything in July. I don’t just mean anything to Winnipeg. I mean anything anywhere. I hadn’t seen that before. You might think that I could reserve first class and pay a ton of money. But no. So I figured that I didn’t really need to fly out of Monterey. I could take a shuttle to SFO, fly Delta to Minneapolis, and then connect to Winnipeg. So I got on Delta’s site. When I put in the details, it had no flights to MSP connecting to

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Interesting Airline Pricing

I had an interesting experience with airline pricing in the last 2.5 weeks. About 2.5 weeks ago, I got on line with United, the airline I usually use to go to Winnipeg. (From there, I drive 3 hours to Minaki, Ontario.) I wanted to go to Winnipeg on or about July 9.

But I got a surprise. The airline literally wouldn’t let me reserve anything in July. I don’t just mean anything to Winnipeg. I mean anything anywhere. I hadn’t seen that before. You might think that I could reserve first class and pay a ton of money. But no.

So I figured that I didn’t really need to fly out of Monterey. I could take a shuttle to SFO, fly Delta to Minneapolis, and then connect to Winnipeg. So I got on Delta’s site. When I put in the details, it had no flights to MSP connecting to Winnipeg.

Then I went to Expedia and voila: I found a reasonably priced flight, about $550, and a reasonable time to leave and arrive in Winnipeg.

Expedia allowed a full refund if I cancelled within 24 hours. So I reserved and the next day decided to go ahead.

Then, a few days later, after a long discussion with my wife, I decided not to go. (Because of Prime Minister Donald J. Trudeau’s travel restrictions, he couldn’t keep me, a Canadian, out of Canada, but he could insist that I go for at least 15 days and quarantine for 14 of them. It would have been very hard for my wife to have me gone that long.) I made that decision after the 24-hour period and so I canceled, leaving about $550 “in the bank” for a future flight on Delta.

So here’s what I think happened. Delta has a 100% refund policy for its seats. But with people’s travel plans so up in the air, so to speak, Delta realized that with lots of cancellations it could have a tiny revenue stream. So it achieved some revenue stability by selling a higher than usual percent of seats to Expedia, which has no 100% refund policy. Delta could keep its reputation for refunds. Expedia, which is one of many resellers and doesn’t have the same incentive to establish a reputation for refunds (and is upfront about the fact of no refunds) makes some money as well.

I have no upset about this. I just find it fascinating.

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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