Long layovers: A guide to determining if the money saved is worth your time

Rhetorical question: When booking a flight, has it ever happened to you to ponder over two different flights, one of them getting you to your final destination quickly and without hassle but at higher cost, and the other with long layovers but that cost less ? Of course you have. In my case, it’s the story of my life! Thankfully, I’ve come up with a framework to ease this decision-making process. So let me share it with you; note that its application can be much broader than simply for low-cost travel.

The ‘hourly-wage-equivalent’ concept

One thing I try to never forget is that my time is valuable and should not be wasted. I do not want to expend energy and/or waste time for things that are simply not worth it. When traveling, I don’t want to waste time stuck in crowded airports to save a few measly pennies. But when does it become ‘worth it’ ? Saving 50$ for 5 hours of extra time ? How about 125$ for 8 hours ?

Well, to answer the question of whether it is worth it or not, that will depend on you. But determining the value of a certain activity is much easier: Evaluate its ‘hourly-wage-equivalent’ (HWE). The HWE is the amount of money per hour you are ‘paid’ for a certain activity (ex: waiting in an airport). A quick test: what is my HWE of booking a flight whose duration is 4 hours longer, but costs 100$ less than an alternate flight ? 25$, right ?!

WRONG! It’s actually much more than that! A thing that’s important to take into account is the ever-omnipresent taxman. Indeed, in our example, the 100$ saved is after-tax (in your pocket) money. So to calculate how much you are really ‘paid’ to wait at the airport, you have to divide the amount by the percentage of money you receive after taking into account taxes (in accounting terms, your marginal tax rate). This amount will be easier for you to judge, since it will be on the same basis as your hourly wage at work. Back to our example: If your marginal tax rate is 40%, the 100$ becomes 167$, which translates to almost 42$ per hour! That 4 hour wait seems much more interesting now, doesn’t it ?!

Let me give you a couple of real life examples of decisions I had to make and how I calculated my hourly-wage-equivalent to help me decide if it was worth it or not:

  • The overbooked flight: Coming back  from Rio de Janeiro last week, I had a 7 hour layover in Miami (this layover was a separate HWE decision!). After going through my playlist about 6 times, eating more Cuban pastries than my stomach could handle, and walking around every square inch of the airport a couple of times, boarding time was fast approaching. That is when I heard an American Airlines announcement: ‘Attention passengers on flight AA-XXXX to Montreal, we are looking for volunteers to board a later flight, as the plane is slightly overbooked. We are offering a 500$ US reward. Please come to the boarding desk for more information’. I immediately jumped out of my seat and ran to make sure I was the first to reach the desk. OK, it was time for me to make a quick calculation! The next flight left about 8 hours later. So 500$ US for 8 hours. The USD/CAD exchange rate stood at about 1,35$, and my marginal tax rate stood at about 51% (yes, wlecome to Canada!). So (500 X 1,35)/(1-0,51) = about 1,375$CA / 8 hours = a whopping 172$ CA per hour! Needless to say that despite the fact that the idea of waiting an extra 8 hours almost made me mini-vomit, I jumped on the opportunity. I later noticed that not many people had calculated the hourly-equivalent-wage, since I was practically the only one who had volunteered! I have the impression that if they went around asking passengers ‘Would you like to be paid 170$ per hour for the next 8 hours to do absolutely nothing ?’, they would have gotten a lot more than a few volunteers!😀
  • The ‘next-nearest airport’ situation: Being from Montreal, my closest airport is of course the Montreal airport (about 30 minutes away from my apartment). However, there is also the Plattsburgh airport (1h15 away) and Burlington airport (1h30) in the US that can sometimes offer cheaper flights to certain destinations. I came upon a situation where 3 of my friends and I were planning a 5-day football trip to New Orleans, and flights were similar in duration but about 150$ CA cheaper from Burlington than Montreal. Parking costs 7$ US per day at the airport, extra gas costs would amount to about 25$ CA, the US/CA exchange rate was about 1,25 at the time, and I estimated the total extra time to go Burlington airport instead of the one in Montreal at about 3 hours (I added an extra hour to pass the border on the way in and out). Using the same 51% tax rate, the calculation would be: (150$ – ((7$ X 1.25 X 5 days)/4 people) – (25$ / 4 people))/(1-0.51) = 271$ divided by 3 hours = 90$ per hour. Again, it was an easy choice. However, had it been only a 75$ difference in flight price and had I been traveling alone and not splitting gas/parking with my friends, the choice would have been harder: About 30$ per hour.

Remember to deduct extra costs as well in your calculation.

So always keep the hourly-wage-equivalent in mind when booking your flights or when confronted with similar decisions; it’ll give you a rational way of evaluating if it’s really worth your time or not. It’s great, because you get to decide how much your time is worth according to each individual decision.

Any thoughts ?

Adventuriously yours,

Jason

4 thoughts on “Long layovers: A guide to determining if the money saved is worth your time

  1. Chrinstine

    Hey just wanted to give you a quick heads up.
    The words in your article seem to be running off the screen in Safari.
    I’m not sure if this is a formatting issue or something to do with web browser compatibility but I figured I’d post to let you know.

    The style and design look great though! Hope you get the issue fixed soon. Thanks http://bing.net

    Reply
    1. jason.lemire Post author

      Thank you! I’m having a bit of difficulty with web browser compatibility; I’ll try and get it resolved soon!

      Jason

      Reply

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