Why Air Travel Could Be A Mess Forever

Every week, Wall Street Journal author Scott McCartney does a piece called “The Middle Seat.” For lack of a better term, I’d describe it as a human interest story. Or maybe an airline interest story. I don’t know. But it’s usually an interesting and informative article.

Last week, Mr. McCartney did a piece called “How to Fix Air Travel? These Readers Have Answers.” Readers were asked for solutions to common airline problems, and they responded. And their answers taught me one thing: If passengers expect a solution to air travel frustrations, they will be disappointed. It’s not changing, and could be getting worse.

Fixing Air Travel: for Passengers, Or For Airlines?

delta one

What passengers want. You can get it, but it’s going to cost you.

I get it. Airline travel, particularly in economy, is horrible. And if you want to travel up front, the price is probably out of your range. Right now, there are two ways of looking at the dilemma:

  • Airlines are private enterprises and can charge what they want. As long as there’s enough space to ensure passenger safety, it’s not an issue. If customers don’t like it, they can go somewhere else. With air travel, you’re paying for speed.
  • True, airlines are private enterprises, but they still operate in an oligopoly. We will never have true competition, because more than 80% of seat miles are controlled by four airlines, and there are few new gates being built to accommodate competitors.

Regardless of your personal beliefs, the political and economic environment generally favor the first bullet point. Airspace is viewed as a free market, and airlines can choose what they want for ticket prices. If they want to add fees, they do. Wanna bring baggage? That’ll usually add another charge. Many of these fees started in 2008, when airline revenues declined double digits. It was a way to generate additional revenue without actually raising ticket prices.

There’s a case to be made for minimizing restrictions. We’ve tried regulation, and it didn’t work. After de-regulation, ticket prices dropped precipitously. On an inflation-adjusted basis, you’ll pay less now for a ticket than you did thirty years ago. True, there’s no deck of cards included, but you can bring your own. And it’s not like we haven’t seen new airlines. Southwest, for instance, is a largely post-deregulation phenomenon. It now flies more domestic seat miles* than any other airline. Southwest is known for charging no nuisance fees. Likewise, the single fastest growing airline today is Spirit. Unlike Southwest, Spirit is known for practically giving the ticket away for free and charging tons of fees.

The problem, of course, is that the above paragraph suffers from survivorship bias. Anyone remember Skybus or Independence Air? They existed for a nano-second in the history of the industry. Check out this (incomplete) list of bankrupt carriers and you’ll get an idea for the power that the legacy carriers have.

Wall Street Journal Reader Suggestions

While I’m sure that readers had numerous suggestions, some of which aren’t fit for print, the article focused on two pain points: boarding/carry-on bags and fees.

Fees

citibank prestige

I’ll start with the second one first: Fees. Bad news. They’re not going anywhere. In fact, if anything, there will be more of them. An airline executive once told me that the industry made a mistake by giving away too much for free. Not exactly politically correct, and probably reflective of the  reason that passengers hate the companies so much, but it definitely reflects the way that the airlines view customers: dollar signs with feet.

But there’s another group that likes fees: passengers. Okay, no passenger has ever said, “Wow, I love this airline, except they don’t charge enough fees.” On the other hand, the ultra-low cost carriers (Spirit, Frontier, Ryan Air) are the fastest growing segment of the airline industry. They bait passengers with ridiculously low fares and then dare you to fly for that much. Want a seat? Fee. Want a bag? Fee. Want a can of Coke? Fee. The average American only flies one or two flights per year, and they base their decisions almost entirely airfares. I have a feeling that a lot of readers would, correctly, state that they would never fly Spirit and will happily about another $25-50 to fly on a “real” airline. But I’m also guessing that my readers don’t represent the demographics of the average American.

One passenger said, “‘I get that the airlines want to maximize their revenue from weekly business travelers. But it’s a bummer their policies continue to penalize everyone else.'” I understand the frustration, but the airlines want to maximize revenue from everybody. I’m not sure how the passenger views payments as a penalty.

Baggage and Boarding

delta, alaska

The enemy?

The biggest problem here is that everyone wants something different. Elite members want to board first to get overhead space, while the credit card holder wants to know why they’re in boarding group one, but are still in the fifth to board because so many groups are ahead of them. Meanwhile, the ordinary passenger who doesn’t have the airline credit card or elite status finds themself last in line. And being last in line means no overhead space for bags. Which brings up another issue. Bags.

The reason, of course, that nobody wants to board last is a function of the airlines. In 2008, they started charging for checked bags. So in order to save money, passengers started bringing more carry-ons. Makes sense. Except the airlines aren’t equipped for a carry-on from everyone, so they end up checking the bags of the people at the end.

The extra carry-ons create another issue: time. Given the fact that passengers spend a good deal of time trying to shove a big bag into a small overhead compartment, boarding has now become a 45-60 minute process. Meanwhile, the flight attendants, who want to get out on time, are shouting into the to tell passengers to sit down. Which they can’t do, because of the outcome of the checked baggage policy. Some solutions mentioned are non-starters for the passengers. For example, try eliminating overheads altogether. You’d have a riot. Actually, you wouldn’t, since so few passengers would be willing to fly such an airline. if the airlines could find a way to guarantee that passengers’ bags would be waiting for them at the carousel, that might be one thing, but good luck fulfilling such a promise.

The most innovative solution that I’ve seen comes from Spirit. They don’t discriminate against anyone. If you want to check a bag? Fee. Carry on a bag? Fee. But what makes them really interesting is that they actually charge more to carry on a bag than they do to check one. Nudging passengers to check their bags speeds up, well, everything.

Solutions

Mr. Morgenstern did his own list of suggestions the week before. Sadly, they’re ones that we’ve seen before and that the airlines would be loathe to implement. Why is that? Because any increase in customer loyalty would more than be lost in lower revenue/higher costs. For instance, increasing leg room means pulling seats off planes. Fewer seats means higher costs, since costs are measured on a per seat basis. Likewise, coupon books, or paying a subscription for change fees, are non-starters. Airlines maximize revenue through dynamic pricing (He also suggests slowing down price changes.). There’s no way that they’re going to sell a coupon book at a price that would be advantageous for the customer. Presumably, the coupons would be subject to demand. By that point, the revenue management system would have lowered the price. And the airlines make too much money from change fees to offer a subscription service for them. There’s no way that those go away.

Overall

Sadly, the airline industry has become an adversarial system. A dollar in a passenger’s pocket is one out of the airline’s. It’s hard to come up with a solution that doesn’t result in fewer dollars for the airlines and their shareholders. Southwest has pulled off a customer-friendly product because it was designed that way. Either way, somebody’s going to have to take some pain. My suggestion is that the airlines make at least a few changes (e.g., guaranteeing that families can sit together) before the changes are thrust upon them. True, the industry has powerful lobbyists, but no politician has ever gotten less popular for speaking out against the airlines.

Why Air Travel Could Be A Mess Forever

 


*Beginner’s Hint: A “seat mile” represents flying one seat for one mile. For example, if a plane has 150 seats and flies 100 miles, it has flown 15,000 seat miles (150*100). 

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