If this is indeed the case -- good riddance to that practice! Why should I be sorry that it goes?
Of course everyone wants the $50 tickets, so the market gets all weird trying to both fill flights and charge as much as possible, while being competitive with other airlines that are trying to do the same thing. Because there are competing airlines, the final margins stay low, so the airlines are barely "maximizing" profits so much as they are simply maintaining profitability.
But once the company starts defining "worthy of cheap tickets" groups the system becomes very murky; and murky systems impose costs on everyone.
The effort you (and others) are willing to go to get the $50 doesn't seem to match up with the "fine, the practice should go". If it doesn't matter, why expend effort to do it?
If agents make finding cheaper tickets trivial and the default, customers lose that choice.
They go to those who can steer future purchases: travel office employees on personal trips, etc. That's a form of a soft kickback. The $50 tickets due to an airline making a bad demand forecast and running a fire sale on unsold tickets will not disappear.
Disney is doing similar stuff with their app and queuing nonsense.
Actually if I ran an airline I’d try to prevent everyone from being able to snipe the best seats with their agents as soon as they came out. Using lotteries, special manual two factor authentication etc.
Accepting this is currently true, should we prefer this equilibrium?
If you are an inveterate optimizer, it works to your advantage. If you are not, well I guess you just don't care. So net net, yes we prefer this equilibrium.
Credit card case: people prone to overspending and falling in a debt loop, lured in by $500 due to being poor or in precarious situation (perhaps from falling in similar traps in the past), and who end up keeping the card long-term, as the 3-months spending requirement ends up trapping them in the CC spending loop.
This equilibrium you describe, is in many cases built on preying on the weakest and most vulnerable, so no, I don't think it's fine.
That's the kind of person that will not download the app to get the coupons and hunt for the good deals at Safeway, but will also not accept the exceptionally high sticker price, and instead will go shop at another store.
is the same as
> just don't care
No one with an ounce of respect for their body shops at Safeway regardless of the price.
if you're paying for flights you don't want to take, then I'm sure they're happy for the extra spending money of course. Why would you want to do that?
Contractual discounts--which corporations do have--are usually balanced by a guaranteed spend figure. For small and midsized companies, the spend is often paid in advance, to the benefit of the airline, which can carry the float and lock up a portion of market certainty.
My two cents: I have a deep amount of respect for United's tech stack. It is the best amongst US airlines and among the best in the world. However, this is the wrong move for them, and unless other airlines follow (doubtful, since United taking the lead here gives others competitive advantage,) United will have to backtrack in a year or two.
* they are trying to artificially inflate the price
* they could send cargo that is, per pound, more lucrative than the cost of a ticket
It's not like the weight of a person is going to cost an extra $50 in jet fuel
Not much of a factor on more expensive fares, but for short flights where a $50-100 fare is realistic.
[0]: even with today's oil prices, the extra fuel is only $20-30 for a transcontinental US flight. negligible for short flights.
And? They offered a $50 ticket. Did they expect people not to buy it?
If I search manually and find the $50 flight I planned spending $200 on, I’m not going to decide it’s too cheap. MCP acts the same. For at least a decade there have been services that will alert you when a specific flight drops in price, letting a human basically do what the agents are doing.
If United doesn’t want to sell a ticket for $50, then they should, y’know, not sell tickets for $50.
If airlines didn’t want to play pricing games, they could stop playing pricing games. List a standard fare for a route if you want to sell fares at a standard rate. If you want to try and squeeze me for an extra $20 because I’m buying during work hours, or $100 because I visited your site 5 days ago and now you think I’m desperate then you don’t get to complain when I use underhanded tactics to get the best deal. They make the rules, they shouldn’t be surprised when their convoluted system gets exploited by people that know the rules.
Nicely put.
They make the rules, and so they'll try to do that again.
If they aren't interested in games they could publish a set fare for a set route. Instead they have 4 or more fare classes visible to end users and more in the backend leading to opaque unpredictable pricing, they gamify the experience using literal points and rewards, they constantly change prices, they charge fees for services that vary depending on fare class, what credit card you purchased the ticket with, what credit card you currently hold, how many times you've flown in the past year, how many miles you've flown, how many dollars you've spent to fly those miles. I'm not sure they could make it more of a game (BTW, games are not in opposition to making money, they frequently enable making more money. Exhibit A is airlines. Game theory textbooks use them as examples).
Sounds like Google Flights.
If AI agents were more effectively managing flight paths, determining pricing, managing communication channels on the supply side, it would technically decrease cost per flight, but on the demand side, if AI agents just find the cheapest flight and book it, all it does is beat someone else who likely would have gotten to that flight a bit later.
I do think eventually it's going to be supply agents communicating with demand agents that lead to a coordination equilibrium. But until then it's just a race to who has the faster, more integrated models, and now, who has models which can bypass the restrictions providers place on their use.
It doesn’t take much compute or anything really above the cheapest claude subscription to do this.
Similar to how internet evened out access to many things that were in the past blocked by access to knowledge.
Imagine two competing political candidates, one has funding from an AI lab and produces thousands of short-form AI videos per day and spends millions of analysis of the full spectrum of feedback and performance of the ads, simulates public sentiment, pruning every aspect of their persona, response strategy, channels to focus on, etc. Or a company accused of misconduct creating an AI psychological profile of the judge and every jury member via their social media history and demographic information and curating the best permutation of arguments from millions of options that maximize every predicable sentimental vector.
Campaign spending is textbook example of a negative sum game - it can waste unbounded amount of resources and everyone is worse off from it happening.
Your sentence and the comment you linked say completely different things. You say airlines are trying to reduce prices for everyone, the comment says they're trying to achieve perfect price discrimination to maximize revenue. Those are not the same thing.
Agentic access would give Alice the chance to cross-shop and buy the cheaper flight as well. But now, to net the same amount, the airline has to charge $75 per seat, excluding Bob from participating in this market.
There is nothing stopping the airline offering Bob $50 per seat in the second scenario, other than profit preservation. If they were making a profit on the $50 ticket in the first scenario, they are making it in the second. They just happen to also be making less profit on the $100 ticket.
In effect you are making corporate profit a constraint on the market, which is not the case.
Your example actually shows that the welfare extractive pricing algos companies use today can be undermined by AI, which is good for consumers in this narrow example.
It might not be profitable to fly a route at all if not for high paying customers. But if you can get a few high paying customers and provide return on capital, then extra customers are, relatively speaking, gravy.
And the cheap flights for those customers? Consumer surplus, baby.
The industry responded with aggressive unbundling - basic eco now has no carry-on, no seat selection, no changes. All can then be bought as extras.
This is a scenario across many industries - hotels, car rental, cruise, concerts, online retail etc.
Basically - yes that trend is bad for Bob, but it makes things more transparent, fair, and increases competition. It's the way the world goes - hard to stop that.
A similar example discussed recently on the podcast ”The Real Eisman Playbook”[0] illustrates the point: Many retail investors have trading accounts with some cash sitting idle. The brokers earn a healthy margin by investing that cash into short-term money market funds (MMF).
Now obviously, the diligent investors could easily buy the MMFs and pocket the profit themselves. However, many of them are lazy or don’t care. But now with agentic access, even the laziest user can optimize their short-term cash holdings, which might cost the brokers relying on this income dearly.
[0] https://youtu.be/y45yqiCdfI4?si=TzVcAb0mXjdXObUs&t=490[Edit: didn't pay enough attention to the flow of the conversation here - this is really a response to ProblemExplorer's original post, which linked to _diyar's post (parent to this one) as explanation].
No they did not. I am the grandparent and linked to their comment because they concisely explain how the airline made $150 off two sears instead of $100 while giving Bob the $50 deal he wanted (bay making Alice subsidize Bob).
If Alice used an MCP too, there would be no subsidy and neither Bob gets the $50 seat nor does Alice get her $100 seat
"made $150 off two seats instead of $100 while giving Bob the $50 deal he wanted" is maximizing the amount each passenger would pay.
My post was a response to ProblemExplorer's language, not yours.
And you vastly overestimate the price discrimination that airlines have today for comparable classes of service.
They don't make their money on economy seats.
Dynamic pricing is mostly a seasonal and timing game. And the actual money is made in higher classes of service.
This idea that Bob and Alice are shown drastically different pricing for the same seat because of insights into their specific purchasing behavior is just ludicrous.
Most people buy tickets from aggregators who have been already gutted the ability to do this anyway.
You basically argued literally the entire thesis for customer segmentation and behavior based pricing and then called it ludicrous. I hope PhDs and statisticians who make living building these very models don't see this comment and begin to question their entire existence.
You've just read past what I said because you want to disagree.
Why did airlines fly a 737 with full staff on board for just 3 economy grade passengers on a leg (like during times of COVID) ?
Been there! CRW → CLT on Christmas Eve. Just me, and three air hostesses.
I assume it's so the planes will all be in the right place when they're needed the next morning.
In your example ($50/$100), the airline is extracting all consumer surplus. This is called perfect price discrimination, and it is bad for consumers.
There is nothing stopping the airline offering Bob $50 per seat in the second scenario, other than profit preservation. If they were making a profit on the $50 ticket in the first scenario, they are making it in the second. They just happen to also be making less profit on the $100 ticket.
In effect you are making corporate profit a constraint on the market, which is not the case.
Your example actually shows that the welfare extractive pricing algos companies use today can be undermined by AI, which is good for consumers in this narrow example.
Just to be clear, your argument is that it's "counterproductive" and a "local optima" for people to have complete and accurate price information available for purchasing their tickets? And that making this information harder for them to find is better for them? Can you point to any real-world examples of an asymmetry in pricing information ending up saving the side with less information money rather than the side with more information to use that in a way that disadvantages the other side?
Since you explain that the rest of us are effectively paying for that subsidised seat, I’m okay with this.
But isn’t this the same argument, more or less, that police make for not wanting to have body cameras on all the time, because they would then be “forced” to give everyone who was breaking the law a ticket or to arrest them instead of letting them go if it “feels like they should”?
The analogy being that the police could pick and choose who they should arrest versus who they should not and let off with a warning - who is “worth it” (i.e. generally, people of, umm, not color, it turns out).
Anyways… it does seem that some kinda of preferential treatment could be lost here. But preferential good treatment for some is kind preferential bad treatment for others, so theres that.
Feel free to ridicule my argument.
Later on, assuming all of the carriers are affected by this, flights will get more expensive and maybe we will invest in other modes of transport that is cheaper
This has nothing to do with AI. Any sale pricing cause the average non-sale price to go up! This is why many companies outright refuse to participate in sales outside of damaged / opened goods.
> Now United isn't against offering a $50 flight to customers who they deem "worth it" - they just don't want it to be anyone who can run an MCP connector.
I don't understand the premise you're painting here.
Airlines lower the price because they have unfilled seats that are not selling at the current price. The price is lowered as an intentional choice to reduce margins on that seat because making any margin over the fuel cost of that passenger's additional weight is worth more than getting nothing at all.
They aren't thinking about the customer and how lil' Timmy wants to visit his dad in Idaho, they're maximizing profit by rapidly adjusting their service to the supply-demand curve.
This is rarely the case for popular routes. Airlines lower the price for popular routes to increase margin per utilization which is why skiplagging is not encouraged because it decreases the margin per utilization.
> they're maximizing profit by rapidly adjusting their service to the supply-demand curve
if they were doing that, they would be booting off customers who paid less than those on the wait list.
If it was legal they would definitely do this. And the times they are allowed under the law to boot paying passengers, it is definitely someone in economy
Do “many”? The companies I’m familiar with who used to do this have largely abandoned the practice due to consumer expectations of sales.
I agree, a lot of them give it up and "many" is overly generous. I think I remember that Thursday Boot Company still does it?
Your premise is false, as it rests on the logic that there is a zero sum game between passengers. Airlines offer tickets at the level and price they feel like they can sell them in the marketplace. There's not some invisible total allocated to passengers on each flight, where if one person "gets a deal" others pay for it.
If I need to fill a seat last minute at a ridiculous low price, I'm glad an MCP client will fill it for me.
If the concern is that everyone will wait until last minute, that sounds like a problem that solves itself, last minute tickets will increase in price until the minimum price for air time is achieved.
Economics and all that...
Yes there is an issue.
An airplane can only fit a fixed number of people per leg. One way you can make money in a low margin business is make up in volume - this is the game gas stations, grocery and discount stores play - like Walmart.
You cannot play the volume game when you're physically constrained on volume, so you have to play another game.
I am not sure I understand.
I guess you're saying that they can't have volume because space is limited, but fine, then charge more than $50. Right? They are charging that because they need to fill the seat, I'd think. That's not a volume issue, it's the opposite.
No?
I don’t know anyone that’s seen a cheap flight for sale and decided to wait for the price to go up.
There are less price sensitive customers, but even the most price sensitive people don’t ask United if they could please charge them a bit more than the listed price.