Are you being served?

While waiting for my flight at the Chennai airport recently, I was surprised to find sizeable number of passengers choosing to fly an airline that is reportedly in financial trouble. This airline has frequently cancelled its flights in the recent past. Why then were these passengers willing to risk flying this airline?

The obvious answer would be that the airline may be offering its tickets at a discount to its competitors. Sure enough, information on a travel portal showed that the tickets offered by this airline were approximately Rs 1,000 lower than those offered by its peers, especially on the metro routes. The question is: will individuals risk cancelled flights just to avail this discount?

Emotion versus logic

We turn to behavioural psychology to address this issue. Consider first the reason why individuals may be willing to buy a discount ticket. Our decision making is based on logic and emotion. Separate parts in our brain control these functions but communicate to each other to help us arrive at a meaningful decision. Often, however, the emotional part of our brain overpowers the logical side! And emotional brain gets excited when we see “discounts.” Neuroscientists have in fact shown that the nucleus accumbens, our brain's pleasure-pathway, lights up as a Christmas tree when we see discounts!

This could be a compelling reason for an individual to buy a discounted airline ticket; we typically derive immense satisfaction from the fact that we did not pay the “full price” for a product or service! Of course, not all of us are willing to take the risk of cancelled flights to avail the discount. Why?

Loss aversion

Behavioural psychologists argue that we typically suffer from loss aversion. This means that we prefer to avoid losses than to enjoy gains! There is a cost attached to buying the tickets at a discount. What if the airline cancels the ticket? You will have to most likely postpone your travel and go home or switch to another airline. Both choices are expensive. Going home means you wasted precious time travelling to and from the airport, not to mention the taxi costs. Switching airline is even more expensive, as most airlines charge exorbitant fares on last-minute passenger bookings. The gain, on the other hand, is the discount on the “full price.”

Behavioural psychology, therefore, suggests that we should not buy the ticket unless we are confident that the airline will not cancel its flights. This brings us to the passengers of this troubled airline. These individuals, if they were business travellers, were hard-wired optimists. Or they, perhaps, did not suffer as much from loss aversion, assuming they were travelling for personal reasons!

(The author is the founder of Navera Consulting. He can be reached at enhancek@gmail.com.)

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