Airline fares

Hello dear reader,

Today I spent a lot of money. I wish it could have been for shopping, a new purse or trench coat would be quite welcome. No, unfortunetaly, I purchased some little piece of papers that gives me the right to fly. It seems to me that I spent an awful lot of money. I find that for the past months, prices have exploded, but maybe I'm biased. So I decided to investigate a bit to understand why airline tickets cost the money they do and if we pay for what we get.

It is important to know, as a matter of fact, that airline companies, since 2001, are losing an awful lot of money. In fact I don't understand why they haven't gone to bankrupcy yet. This gives me a little bit the feeling than I am shooting on a crippled, but anyway. On the following graph, taken from a very interesting paper that I found online from Dipasis Bhadra and Brendan Hogan [1], you can see that for the last years, the airline industry in the US loses between 1 and 2 % of the GPD per year on average. This is huge:

The consequence of that is that since 2001, the US airline industry is heavily subsidised by the governement.
What is more interesting for the question of tickets fares, the period between 2000 and now, have seen a explosion of low-fare companies. This increase has happened, with no increase of the global activity: the increase of low-fare companies have shrunk the activity of the 'big 6' (the six main american airlines.[1]
A second article is raised my attention. [2] It shows how a big Canadian company (that I won't name here) advertised major discounts but in reality didn't reduce very significantly its price. This company is in a favorable situation: a part of the market is made on international and long distance journeys, on with there is a significant competition. But the major part of its activity is done on markets where it holds a monopole. On monopole spots, the company doesn't really need to apply major discounts. So it advertise a campaign of offers (pretty much all year round) and in fact only gives a few tickets with those special fares. The rest is still sold at high price. On markets with a significant competion of low-fare companies, then it is different. Tickets have to be sold cheap. In the end of the day, travellers of monopole spots pay for the others.
I want to add that, in my view, segments where traditional companies compete can probably be considered as monopole ones. I believe that cartels could easily exist there. It is in fact the interest of those companies which have to suffer from the action of low fare ones on high yields segments.
Well, dear reader, I hope you enjoyed this little story. I hope to have time soon for a new story.

Sources:
[1]http://www.mitre.org/work/tech_papers/tech_papers_06/05_1155/05_1155.pdf, Dipasis Bhadra and Brendan Hogan, American Institute of Aeronautics and Astronautics, 5th ATIO/AIAA

[2]http://www.piac.ca/transport/the_airline_ticket_pricing_game/

United States' new craze: US-Visit

Hello there,

Last night I discovered the new tool that the USA has crafted to fight Evil. So I took the plane from an American airport I had never used before to go back to Canada where I live. Because I'm not American or Canadian, I was asked to use the new super tool of the American customes. It is called US-Visit. I was really mad cause my plane was terribly late, I had no idea I had to do that and I was told so at the very last minute, when I was to board and I had to run back in the terminal to do it....

The procedure is rather simple and quick. You go to a special numerical desk inside the gate lounge of the terminal. You scan your passport and then you are asked some simple questions, to scan your finger prints and to not smile to the camera.

When I got back home I started wondering why I had to do that. I mean, I went through the customs on entering the US land a couple of days before (the usual stuff: angry questions, crumpy teacher's looks, finger prints, left then right, picture, don't smile to the camera...). I can understand (even though I have serious doubts about both the efficiency and the moral validity of that) that the USA are paying attention to who is entering the territory. But I couldn't find any really reason to control the leaving ones. I mean, as far as I'm gone, I'm not a danger anymore. Also if I do something bad inside the US, I guess the american police or the CIA or whatever has the means of checking the plane list and know exactly where I went and when I did so.

So, as I take this blog seriously, I searched online a bit. So this procedure is a part of the
US-Visit program set up by Homeland Security. The entering procedure, that we all know if we travel a bit, is explained again. The outgoing procedure is the same and exist only in some airports, which list is given. I give you this list just in case:

• Baltimore/Washington International
• Chicago O’Hare International
• Dallas/Fort Worth International
• Denver International
• Detroit Metropolitan Wayne County International
• Fort Lauderdale-Hollywood International
• Hartsfield-Jackson Atlanta International
• Luis Muñoz Marin International in San Juan, Puerto Rico
• Newark Liberty International
• Philadelphia International
• San Francisco International
• Seattle-Tacoma International

Wikipedia precises:

There is also a pilot program in effect at certain airports and seaports where visitors who used US-VISIT on entry will have to perform a similar procedure upon exiting the United States. Passengers will check out of the country at exit kiosks located within the terminal. Similar to the process the visitors encountered on entry, their travel documents are read, their two index fingers will be digitally scanned at the exit kiosk, a digital picture will be taken and they will receive a printed receipt that verifies that they have checked out. An exit workstation attendant will be available to assist with visitors' check out.

The reason for the whole procedure (entering and outgoing) is also expressed:

Using all these tools, the U.S. Customs and Border Protection Officer will then either admit you or conduct additional inquiries based on the verification results. These procedures reduce fraud, identity theft, and the risk that terrorists and criminals will enter the U.S. undetected or by using stolen or fraudulent documents.

But here again, no convincing reason for checking people who leave. Especially since the proecdure is note general, I imagine that anyone who has something to hide, or just the poeple who think they are sufficiently bothered will choose to leave America from elsewhere. A friend told me it is maybe just for statistics. Possibly, but is that worth the bother? I really don't understand... and I couldn't find anything conceiving online. If you have an idea, you're quite welcome to comment on that.

Have a good day!

Tara-George

PS: In my searched I found some interesting statements. First, it is really fun to see that the system wasn't even conceive in America... some foreigners need to be checked, others....

The consulting company Accenture is the lead contractor for US-VISIT. The selection of Accenture in 2004 was controversial due to the location of the company's headquarters. In 2000, Accenture was created and incorporated in Bermuda, as a separation of global business consulting services from the financial consulting services of Andersen Consulting. Because Accenture was created in 2000, and because Andersen was not previously incorporated, Accenture was never previously considered to be incorporated in the United States. (from the Wikipedia site)

PPS: Some fellow bloggers are even tougher on the system, criticising the cost/efficiency ratio. Check out this post from Schneier: Failure of US-Visit

Sources: http://www.dhs.gov/xtrvlsec/programs/editorial_0525.shtm
http://en.wikipedia.org/wiki/US-VISIT_(United_States_Visitor_and_Immigrant_Status_Indicator_Technology)
Blog of Schneier: http://www.schneier.com/blog/