David R. Henderson  


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His view is that most people who complain about Spirit fail to grasp how it's different from other airlines -- like visiting Wal-Mart and expecting Nordstrom-level service. You want Spirit's fares? You'll have to play by Spirit's rules.

This is from "Don't Come Crying to This Airline," a nicely done piece on Spirit Airlines. Worth reading. H/T to Lew Rockwell.

It reminds me of a conversation I had with a United Airlines flight attendant a year or so ago. I was telling him that I didn't mind the unbundling of services and that it was probably a result of deregulation. When the Civil Aeronautics Board ran a cartel, it made sense to compete by adding services. When the cartel was ended in the late 1970s and early 1980s, unbundling made sense but certainly took longer than I expected. This young flight attendant, who had had no experience of the regulatory era, uttered words of wisdom. He said:

In every transaction with an airline there are two customers. The first is the one who buys the ticket. He wants the best deal and is willing to go to another web site to save ten bucks. The second is the customer who shows up and acts as if he bought first class.

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CATEGORIES: Regulation

COMMENTS (11 to date)
ed writes:

unbundling made sense but certainly took longer than I expected.

This is a really interesting point. The ghosts of regulation can persist for decades after the regulations end. This shows that the "free market" incentive mechanisms assumed in standard economic models work very slowly indeed.

Might this have some lessons for the prospects for health care "reform?" Even if we base such reform on sound economic principles, the presumed incentive effects might take decades to work through.

(Overall I think this is just more evidence in favor of Masonomics: "Markets fail. Use markets.")

scott clark writes:

I think we have a similar problem in commerical banking with banks breaking their own policies and customers just expecting it. 'Oh, you broke a loan covenant, no problem, here's a waiver. Oh, you can't pay as agreed, here's a loan modification.' But that customer would switch banks for >10bps and switch right back for a few more bps.

Brad Hutchings writes:

As Jonah Goldberg once wrote, "Most of the libertarians I know want nothing to do with LewRockwell.com". When did you miss the memo?

David R. Henderson writes:

Dear Brad Hutchings,
My guess is that you're kidding but I've learned the hard way that it's often difficult to know by reading an e-mail or blog post by a stranger whether the person is kidding.
In case you're not, here's my answer. I think that if you just stuck with reading people you agree with on everything, you would be very narrow indeed. I have strong differences with many of the writers on LewRockwell.com, just as I have strong differences with many of the writers at newyorktimes.com. But I find enough value in each that I go back. To take one recent example, the main web site that seemed to be willing to defend Walter Block when he came under a vicious unjustified attack was the Lew Rockwell site.

Amanda0970 writes:

This is a classic example of American abuse of capitalism. Industries divide their target markets into market structures; hotels, for instance, are divided into limited-service economy/budget, full-service, and luxury hotels. Those who pay luxury prices, have every right to expect luxury service, i.e. Ritz-Carlton and Four Seasons. The founder of La Quinta hotels (a member of the econo-hotel market segment) summed it up this way: "We have a very simple concept. What we're doing is selling beds. Not operating restaurants, not running conventions-- just selling beds." La Quinta's customers know better than to expect a grand poobah from the hotel; they sleep in the bed and they check out, 'nuff said.

Of course, sellers of inferior goods with superior service standards, like McDonald's, just foul up this arrangement and raise consumer expectations when they should be rather low. McDonald's used to be get your burger, get your fries, get your shake, and get out. Now, we have three different specifications of Happy Meal toys and specific procedures for the way bags are facing when they are handed out the window, for crying out loud. I could go on.

So basically, as consumers, we just need to keep in mind that we need to expect what we pay for.

Brad Hutchings writes:

I wasn't kidding. The Lew Rockwell and Mises Institute crowd give libertarians a horrible name. I'm the last person in the world to advocate any sense of political correctness, but people who are still fighting the Civil War are worse than tone deaf. Sure, a stopped clock is right a couple times a day. Put another way... when Ron Paul's disgustingly racist newsletters surfaced during the primary, who did all the fingers point to as the ghost writer?

arne b writes:

So the whole article basically says that people in the U.S. can now get the RyanAir experience, too, and even on trips slightly longer than the average RyanAir flight.

While I agree that this qualifies as news somehow, I do not get why someone considered this worth more than a single paragraph.

Anyway, here is a nice cartoon summing up RyanAir's approach (although the link should really have been posted yesterday).

scott clark writes:


I think you're fighting the wrong fight here. The Mises Institute has kept a lot of classic libertarian works in print, works that were libertarian long before that word exisited. Their advocacy and championing of these ideas are making a difference. I think we saw that with Ron Paul.

And I think there is a very valuable place for revisionist histories, including fighting about the real causes and consequences of the Civil War. I think it is a valuable thing to do to tear apart the myth of a heroic and saintly Lincoln, to show people that presidents are just people. Especially around war, where truth is the first casualty, and propoganda is an essential tool for making war, after its over, everybody remembers the propoganda as if it were the facts. So there is a lot of room for historians to come in and revise in order to set the record straight. History can only be a valuable guide to us in the present if it contains true facts. I've been a near daily reader of lewrockwell.com and mises.org and can assure you that any racist commentary must have been left in the past. And I also support seccession anywhere and everywhere for any reason.

Jeremy, Alabama writes:

One time I heard some guy shouting at an airline gate agent "Do you know who I am?!". She got on the P.A. and said "Can anybody help this man? He does not know who he is."

Half the problem is that airlines can't compete in any of the most significant dimensions, e.g. quality of maintenance, seniority of aircrew, overall trip time (gate-to-gate), traffic control priority. So they compete over the peanuts and bottled water.

MikeL writes:

Prof. Henderson's post had nothing to do with Lew Rockwell or LRC and yet you took the opportunity to take a cheap shot at someone not here to defend himself. Take your beef with Rockwell et al someplace else.

The Cupboard Is Bare writes:

"In every transaction with an airline there are two customers. The first is the one who buys the ticket. He wants the best deal and is willing to go to another web site to save ten bucks. The second is the customer who shows up and acts as if he bought first class."

It makes perfect sense to get the best value for your money. I'm always willing to go the extra mile for a good deal and am rarely disappointed for having made the effort. It makes no sense to patronize companies that make you pay for goods/services you don't want/need or charge too much for the things that you do.

Unfortunately, there are those who, instead of being grateful for getting a good deal, cop an attitude and behave as if they are entitled to even more. I sometimes wonder if we have our government programs to thank for that mindset.

At any rate, there are two ways to negotiate for a better price. The first is to threaten to go elsewhere if you don't get what you want (the promise of an adversarial business relationship in which someone always feels like the other guy has gotten over on them). The other way is to let the proprietor know that you'll give them a lot of repeat business if they work with you (the promise of a mutually beneficial business relationship).

It would seem a no-brainer that the latter is preferable, but there are always those who can't believe that it's possible to get a fair price unless they beat the sales associate into submission.

One other thing...I do think Spirit would have fewer customer service problems if they provided an itemized list prior to the purchase of the basic ticket. Chances are people will still purchase some of the services; but they won't have that feeling of being jerked around.

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