The Sometimes Crazy Pricing Practices of Airlines

The Detroit Free Press ran a front page article last Sunday titled "Hub Premiums Cost Delta Fliers Plenty at [Detroit] Metro Airport" about some of the huge differences in airfares for international travel between Delta Airlines' hub airport in Detroit and its regional spoke airports in nearby Flint, Lansing and Saginaw. 

For example, I just checked Delta's website for round-trip travel to Tokyo at the end of October.  For first-class travel, the round-trip airfare from Detroit (DTW) on a 3:25 p.m. nonstop flight is $11,606, compared to only $6,324 from Flint, only about 50 miles away.  If you fly from Flint you could take a short 20-minute flight to DTW at 1:30 p.m. and join the Detroit passengers on the 3:25 non-stop flight and save $5,282.  For travel by coach, you could still save more than $600 by starting in Flint and pay $1,553 round-trip instead of $2,156 from Detroit.  

For first-class travel to Amsterdam on Delta, the cost savings starting in Flint would be less, but still almost $1,500 compared to starting in Detroit ($6,304 Flint vs. $7,777 Detroit).  

One reason given for more competitive Delta fares at the spokes (Flint, Lansing, Saginaw) than the Detroit hub: Delta accounts for 80% of the passengers at DTW and 91% of international travelers.  In contrast, Delta accounts for only 40% of daily flights at the Flint airport, where they compete with AirTran (20% of daily flights), Continental (16%), Frontier (12%) and American (12%).  Less (more) competition at the hub (spokes) translates into higher (lower) fares on average. 

And the article points out that airlines don't generally price their tickets based on cost (e.g. travel distance), but more on competition (or lack thereof) and "what the market will bear."  

Update: Although airline pricing is generally based on "what the market will bear," it seems highly unlikely that the $5,282 difference in airfare to Tokyo between Detroit and Flint (basically a remote suburb of Detroit) can be based on true market pricing, or "what the market will bear."  That is, there can't be true market fundamentals that support a $5,000 price difference between two airports that are 73 miles apart.  And many people living in the northern suburbs of Detroit like Troy, Rochester Hills and Pontiac would be equidistant from the two airports, and might actually prefer the convenience of the smaller Flint airport than mega-DTW.  I predict that some of these significant price differences are unsustainable outliers that cannot persist over time, especially because the crazy, non-market prices have been exposed on the front page of the Detroit Free Press.