WSJ Commentary: Addiction to cheap airfares

[aloft]

The vast a la carte fee structure that's developing may be the industry's bid to neuter the search-engine system that it ironically welcomed to cut tens of thousands of reservations jobs and cut out the commissioned travel-agent industry entirely.

I've been saying since it happened that the industry really shot itself in the foot the day it decided to make the travel agent industry work for travelers instead of the carriers. When they were paid a commission, agents had an incentive to package what they were selling in terms of finding the traveler the best flight times, non-stop flights, or fewest legs rather than the best deals; when commissions ended, it became all about finding the lowest price for the trip.

What's next, charging more for nonstop flights?

 

[wheelsup]

The article says you could get coast to coast fare for $99 in 1981 and $198 in 2008.

I don't think so. I would re-read it.

$99 one way in '81
$198 RT in '08

= $198 RT in '81

 

[kellwolf]

What's next, charging more for nonstop flights?

Some airlines have been doing that for years. They charge more for the convenience. SWA's one of them. Cost more to fly MCO-ABQ non-stop, or you could save some cash by taking a flight that stopped in SAT.

 

[derg]

Ehh, I'm bored! Here goes:

SAN FRANCISCO -- Return for a moment to 1981 and the dawn of airline deregulation: People Express launches a no-frills service with $29 regional one-ways and $99 coast-to-coast fares cheap enough for almost anyone to fly.

And quickly went out of business. I know guys that worked there back in the day and you should hear the stories! Like heck I'm going to fly a full work schedule, have mandatory reserve AND go serve clerical functions in the office on my non-flying days for the privilege to offer America low fares.

Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198 -- which would be about $500 in 1981 dollars adjusted for inflation -- and add-on fees are now the industry norm. It's no wonder airlines are squeezed when we're paying 40 cents on the dollar nearly three decades later.

Add-on fees are probably more of the product of the average traveling joe clicking the absolute lowest price on Orbitz, independent of whether it's a non-stop flight or what airline they're flying.

Even consumer advocates acknowledge the anarchy that's resulted 30 years after the Civil Aeronautics Board stopped setting fares and routes. Deregulation has spawned a second-rate system offering little more than Greyhound buses with wings that make five or more often-late stops daily throughout the country to keep seats filled.

Nah, lots of non-stops coast-to-coast on legacies and LCC's to go around.

"In many ways we've seen the enemy and it is us," concedes David Stempler, president of the Air Travelers Association. "We're not willing to pay for better services yet we fully expect them."

Well, some do expect to get that "$5 footlong" and expect it to be hand-sliced chateaubriand, organic lettuce, stone-ground Dijon mustard and Hungarian Paprika-scented aioli...

"They can't raise fares because they have no pricing control," Stempler says. "It's not that they don't have the courage; it would be business suicide to fall out of lockstep."

There's pricing control. Just that everyone is holding their collective breath until the weak(er) pass out. Lots of brinkmanship going on these days in my uneducated humble opinion.

Instead, most airlines are nickeling, diming and fifty-dollaring buyers with fees hidden from search-engine sweeps to give the almighty consumers what they demand -- except it's now the illusion of the best-available bargain.

That's what the consumer wants! $49 with free mobile-to-mobile minutes, but fees out the ying yang because there's a cost involved with not reading the fine print.

As one blogger on travel-rants.com wrote: "What's next, charging me to go to the toilet?"

Don't go to a restaurant in Europe then!

In the height of audacity, several airlines are using the industry's weak on-time performance as a revenue enhancer by charging extra for seats in the first two rows of coach. Their target market: Travelers needing to catch a connecting flight who fear that they won't deplane quickly enough if they're seated in the back rows.

Now that's a reach... Bulkhead seating has always been a premium seat because of increased legroom and your loyal customers expect something a little above and beyond because of their loyalty to your airline. Or at least charging their credit card to 'miles' on your respective airlines card.

Yet U.S. consumers complain about the airline industry like we do Big Oil when it's our craving for the absolute lowest prices that's crippled the industry.

True.

Somewhere in the last 25 years, Americans came to believe cheap air travel is a right to which we're entitled just like we did cheap gas -- until that train left the station. With jet-fuel costs up 50% in the last year, we're awakening from a similar greed.

I agree.

Southwest planes reportedly make up to seven stops a day. Passengers on some flights from New Orleans to San Francisco, for instance, suffer through three stops and plane changes before reaching their destination -- meaning they've been in five airports in the course of their trip.

Can't "suffer" when you've either (a) went to southwest.com and presumed it was the lowest air fare and/or (b) clicked the 'purchase' button without actaully considering the number of legs or connect time. Read the fine print.

Competitors have been forced to move toward Southwest's model, leading to a steady disappearance of nonstop, long-haul flights throughout the United States. What we've gained in savings by patronizing the likes of Southwest we're losing in time and convenience.

Ehh, maybe I'm misreading Southernjet's flight schedules...

Meh, I've had enough. Breakfast time!

 

[Boris Badenov]

There's pricing control. Just that everyone is holding their collective breath until the weak(er) pass out. Lots of brinkmanship going on these days in my uneducated humble opinion.

Legacies have been saying this for decades. "We need to stay competitive...eventually the market will demand mergers and we'll start making money again". Yet they're not. Making money I mean. In fact, they're taking multiple billion(s) dollar bailouts from the taxpayers. Basically Joe Sixpack is subsidizing the legacies like they're freakin amtrak, all the while they LOWER the fares they're already not making money on. If we're going to have government air service, let's just be honest and have American Governmental Airlines: "We're not happy till you're not happy."

And southwest has plenty of nonstop service. It's all there in black and white on the webpage when you book the travel. boohoo!

 

[msmspilot]

I don't think so. I would re-read it.

$99 one way in '81
$198 RT in '08

= $198 RT in '81

Ok, I see how you could read it that way. However, there is no way that $198 in 2008 is equal to $500 in 1981 as the article states. I'll agree that it's probably just bad wording, but it still makes the author loose credibility in my book.

If he had clarified that a round trip in 1981 was the same price in 2008, and that adjusted for inflation it should be $500, that would be different.

 

[wheelsup]

I agree, bad wording. Who knows what he was trying to say! But the idea that airfares are 40% what they were back "in the day" is pretty telling. Great for the public and the current pilot jobs it has created, baaaaad for business.

 

[da10pilot]

"Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198 -- which would be about $500 in 1981 dollars adjusted for inflation -- and add-on fees are now the industry norm. It's no wonder airlines are squeezed when we're paying 40 cents on the dollar nearly three decades later."

I don't get the misunderstanding. $198 in 2008 = approx $500 in 1981 adjusted for inlfation. You have to take "1981 adjusted for inflation" as a whole. I didn't read it as $198 today = $500 in 1981.

 

[tonyw]

Airlines simply try to outlast their rivals, or buy them out. Airline seats are commodities, and perishable. If you had a load of tomatoes that went bad in 3 days, what would you do? Raise the price to make more money off each one but less in total sales or reduce the price and sell as many as you can to raise the most money you can?

I know your answer - raise the price - but you can see how it doesn't make any sense. Or maybe you can't.

I would rather use those tomatoes as compost than sell them for a price which I could not make a profit on. I've been an owner of a bar, and we had a simple rule.

We ain't selling anything at a loss. Period. If the bar down the street wants to sell quarter beers, they can, but we're not going to. If anyone doesn't like it, they are welcome to head down to that bar. We won't miss them. We only want profitable customers. Non-profitable customers? They can go be someone else's problem.

I think there's an opportunity for an airline that shows some balls.

What they could do is say, no, we're not going to show up first on Travelocity or Expedia. But what we're going to do is charge you a fare that works for us. And we're not going to charge you for your checked baggage, or your sodas, or blankets, or a window seat. That's all part of the package.

You decide whether you want to be nickle and dimed or if you want to pay a flat fee. If you want to be nickle and dimed, go fly someone else. If you don't, come fly us.

It becomes an opportunity to differentiate yourself from the competition and it makes your commodity product different.

 

[Patrick]

I would rather use those tomatoes as compost than sell them for a price which I could not make a profit on. I've been an owner of a bar, and we had a simple rule.

We ain't selling anything at a loss. Period. If the bar down the street wants to sell quarter beers, they can, but we're not going to. If anyone doesn't like it, they are welcome to head down to that bar. We won't miss them. We only want profitable customers. Non-profitable customers? They can go be someone else's problem.

I think there's an opportunity for an airline that shows some balls.

What they could do is say, no, we're not going to show up first on Travelocity or Expedia. But what we're going to do is charge you a fare that works for us. And we're not going to charge you for your checked baggage, or your sodas, or blankets, or a window seat. That's all part of the package.

You decide whether you want to be nickle and dimed or if you want to pay a flat fee. If you want to be nickle and dimed, go fly someone else. If you don't, come fly us.

It becomes an opportunity to differentiate yourself from the competition and it makes your commodity product different.

I agree 100%. Problem is, those people that understand the value equation aren't flying the airlines anymore- they're making use of fractional ownership or flying the company's jet. I'm just not sure there are enough "middle class" (a dying breed anyway) customers who are willing to pay a premium for a better experience.

What I want know, is why you haven't seen an airline file bankruptcy saying "well, we charged the price we needed to charge to cover our costs, and due to market pressures we just didn't have enough business." The entire premise of operating at a loss in exchange for market share, particularly in an industry which really doesn't have variable costs, is completely asinine.

 

[wheelsup]

We ain't selling anything at a loss. Period.

That's a great rule on those beers that have a pretty long shelf life. You could afford that luxury. When an airplane leaves, the seats can't be kept to be sold later, they go unsold. What works in one industry doesn't work in another.

The fact that you would rather make zero dollars off those tomatoes vs. some just defeats me. I really don't understand where that logic comes from. It's done in pretty much every grocery store I've ever been to, except replace "tomato" with "beef", "salmon", "lettuce", or what have you.

 

[ppragman]

That's why we need to start running the small aircraft transport system like satsair. Further, I think that if people started using airplanes for what they were built for, e.g. navajos, and piston twins in a commuter fasion, turbo props for the slightly longer legs, and jets for legs over 2 hrs or so, we be in like flyn. A low coast airline, running navajos or 402s around may sound rediculous, but piston is way more efficient for those short trips, and you can offer more point to point service. Think mini-southwest.

 

[wheelsup]

Reduced demand and increased ticket prices may indeed warrant pistons and small turboprops back again.

 

[tonyw]

The fact that you would rather make zero dollars off those tomatoes vs. some just defeats me.

It's simple.

If people start to think they can buy things at a price that doesn't yield a profit from me, then they will only buy when it hits that price.

I don't want customers like that. They are less than useless to me. They use up my resources AND they go and tell people, oh, if you pay x dollars you're getting ripped off because I paid y dollars.

Screw that.

The customer isn't always right. When they want a product for a price that won't allow businesses to make a profit, they're wrong.

And if they don't like it, businesses should have the balls to tell them to take a long walk off a short pier.

Besides, where are people going to go? Airplanes are full. On my flight from Chicago, there wasn't a single empty seat. That tells me airlines can dictate the price. If there is no excess capacity, then if you've got the balls, you can say, you're paying x dollars, and if you don't like it, try to find a seat on another airline. Oh, wait, there aren't any?

Then pay up or take Greyhound.

And if you hate an airline for doing it, well, you hate them anyway, so who cares?

 

[68navajo]

That's why we need to start running the small aircraft transport system like satsair. Further, I think that if people started using airplanes for what they were built for, e.g. navajos, and piston twins in a commuter fasion, turbo props for the slightly longer legs, and jets for legs over 2 hrs or so, we be in like flyn. A low coast airline, running navajos or 402s around may sound rediculous, but piston is way more efficient for those short trips, and you can offer more point to point service. Think mini-southwest.

Satsair is laying off people and grounding aircraft as of Nov. 1 per Steve H. ,ceo