Eli5 why airlines tickets from country to country are 20 euro when taxi from town to town is 20
In: Economics
Because planes are cheaper per person than taxis? Yeah planes are more expensive, but they fit a lot more people too.
The aviation industry is so huge that it can rely on the economics of scale to bring down labour costs very low. An aircraft can fit on a lot of paying customers and airlines also get large government subsidies (mostly in the form of tax exemptions) which are supposed to encourage more tourists to fly to the country in question and spend money there.
1. 20 euro is just the base price, you usually pay extra for luggage, food, chosen seating.
2. An airplane can hold tens or hundreds of people. A taxi can hold 4.
3. Supply and demand. Airlines need to move airplanes around (if they fly a plane from A to B, they’ll need to return the plane from B back to A). If no one wants to fly from B to A, they sell the ticket very cheaply – it’s better to have a plane full of people who bought a cheap ticket than an empty plane.
In short, because the demand for taxis and demand for planes is financially worth exactly the same. The fact one is a plane going far, and the other is a car not going so far, is largely irrelevant.
Lots of things affect supply and demand, but that’s ultimately what it comes down to. Companies will charge as much as they can to maximise their revenues, and so these price points represent the maximum they think people will pay for those products/services. Ergo, if two things are priced the same, it’s because they have the same relative demand and supply.
If there are lots of big planes with only a limited number of people wanting to fly, then plane tickets will be relatively low. But if there are lots of people wishing to use a limited number of taxis, which can only take a handful of people at any one time, then prices will be relatively high.
Airlines can’t afford to sell all their tickets that cheap. But the difference between flying an empty seat and a full seat is pretty small – a tiny difference in fuel costs. If you sell that seat, even for €1 that’s a euro more than you would otherwise receive. And you might sell a coffee or something to that customer.
A taxi isn’t in the same position. It can sit and park until a paying passenger comes along.
one thing I see missing here is many airlines have assigned slots for takeoff and landing at airports that they will lose if they dont use them.
if no one is buying tickets they have to fly the planes empty which is a big cost, so they would rather sell seats for far less then not at all.
Because airlines have more profitable routes that they use to subsidize the less profitable routes.
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