## One of the dumbest purchases

On Sunday mornings I often listen to a talk radio show on financial advice called the “Ric Edelman” show.  The show is an infomercial for a nationwide chain of financial advisers.   A few minutes ago Ric stated that one of the dumbest purchases anyone could make was flying first class.  Given I am thinking about flying to Tokyo and Seoul (see the Nov. 15th post) in either coach or business class I was struck by the comment.

The difference in price is a lot.  The post shows it costs about \$3,000 to fly business class while coach was a bit under \$2,000.  This means business class tickets costs 50% more.  If the decision is based solely on speed, Ric is clearly right.  The fancy seats in the front of the plane get there at the same time as the cheap seats in the back of the plane.

However, time to the destination is not the real factor.   Instead for long haul flights it is time to recover.  When people get off a very long plane flight it can take a day or two to recover.  Being able to get sleep and some leg room is worthwhile because it enables you to regain your productivity quicker.

My personal experience (yours might be different) is that it takes about 3/4  of a working hour to recover for every hour sitting in coach on a long haul flight it.  This means a 10 hour flight kills off about one work day.  The round-trip flight to Tokyo/Seoul is 30 hours in total, which means about 3 work days to recover.  So the decision rule is pretty simple.  If,   [First/Business Class Price – Coach Price] / Recovery Time > What You Lose in Productivity, then you should fly business class as a smart financial decision.

In this example the value of flying business class is (\$3,000-\$2,000) / 3 = \$333 per day.  People who earn more than \$333 per day in this case should fly business/first class and people who earn less should fly coach.

This simple formula shows first that Ric’s blanket statement that flying first class is one of the dumbest purchases someone can make is not always true.  The second thing the formula shows is why most professors are found in the back of the plane with their students!