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A memo to airline passengers
If you don't want to pay what it's worth, then stop whining about air travel.But it's been ringing in my ears ever since.
Because let's face it: we're not paying enough for commercial air travel. Airlines have cut costs to the bone, slashing pay, eliminating services, deferring new planes, hedging jet fuel purchases, and all the rest. And yet they're still losing billions.
But while the cost of most everything else we buy, in inflation-adjusted dollars, has gone up (notable exceptions being things like TVs and phone service), the price of air travel has gone down over the last several decades.
Back in the early 1960's, when a gallon of gas cost 29 cents, a flight from New York to LA could be bought for as little as $250 round-trip. Today, you can fly that route for as little as $178 round-trip when there's a cutthroat sale going on, but that gallon of gas costs 10 times as much. A brand new Ford Pinto cost $1999 in 1972. And that $250 flight, in 1960 dollars, works out to about $2200 in 2009 greenbacks.
For some odd reason, and I've never heard a rational explanation for this, North America's airlines can't seem to price their product at what it actually costs them to deliver it.Experience has shown them that when they raise fares to profitable levels, people simply reduce their flying, and that impacts the entire travel industry-hotels, rental cars, attractions. Because, let's face it, most air travel is discretionary. Few people have to fly to Hawaii unless it's to a funeral or to attend college.
And so instead of raising prices, airlines have cut costs, wages, seat pitch, and perks such as meals and pillows. And that's resulted in cramped and dirty planes, cancelled routes, and grumpy employees and passengers. But what, exactly, do you expect when you pay more for the round-trip taxi ride to the airport than for your flight to Chicago?
Look, I've built a career and an award-winning airfare web site on telling people about insanely low airfares. And I love my work. But honestly, when I see a $98 round-trip fare from New York to Denver, I shake my head, and I feel a little guilty. Am I helping the situation by telling folks about how desperate the airlines can get sometimes? It's like stealing candy from a baby, not that I've ever done that. Or at least I don't think I have.
One way that the airlines are trying to achieve pricing power, frankly, is by reeling consumers in with ridiculously unprofitable fares and then hitting them with all these new fees for checked bags, pets, itinerary changes, and frequent flyer ticket redemptions. But even that hasn't returned them to profitability. All it's done is generate thousands of newspaper headlines. Speaking of which, enough about those holiday surcharges already! So the airlines are trying to lose a little less money. Give them a break!
Eventually, and who knows when, the party has to end. Fares need to go up, or we'll see more airline mergers and Chapter 7 filings. And then fares really will go up. But meanwhile, perhaps it's time to face reality. Sure, air travel isn't fun anymore. Sure, it's a PITA. But just as surely, as crappy as it is sometimes, this is what you and I told the airlines we wanted by voting with our wallets. So maybe we should all just stop whining or get used to paying a fair price for airfare.
George Hobica is the founder of Airfarewatchdog™, the most inclusive source of airfare deals that have been researched and verified by experts. Airfarewatchdog compares fares from all airlines and includes the increasing number of airline-site-only and promo code fares.
Filed under: Business, Airlines, Budget Travel, News, Consumer Activism
Reader Comments (Page 1 of 2)
EurotripDon Dec 1st 2009 11:02AM
Ryanair and Southwest charge cheap fares, yet they're profitable, aren't they?
georgehobica Dec 1st 2009 11:09AM
Not lately. The only profitable carrier right now is Allegiant Airlines, mainly because they cross-sell hotels, rental cars, shows, and attractions.
Jonathan Weinberg Dec 1st 2009 11:25AM
Ryanair (and other European LCC's) have made a business of flying for insanely low rates, and they make tons of money, albeit on ancillary fees (fees for baggage, pets, airport check-in, etc.). In their last fiscal year, ancillary revenue was at €598 million, compared to a total revenue of €2.942 billion. I suspect that we've only seen the beginning of these fees in the US.
georgehobica Dec 1st 2009 11:30AM
@Jonathan I agree. If US airlines want to slash costs further, then they should eliminate airport check-in, as Ryanair has done. Get your boarding pass at home online or use an airport kiosk. Pay a charge for getting a boarding pass any other way. I haven't used an airport check-in representative for years. If you're checking a bag, pay online before leaving home, bring it to a baggage drop off point at the airport where its weight is checked and it's tagged, and drop it on a conveyor belt and head to security. I wouldn't be surprised to see US carriers adopt this model in future.
Tom M Dec 1st 2009 12:03PM
So Mr. Hobica is suggesting that we pay $2200 for a cross country flight today?? Gee, imagine if that were in place. You think the economy is bad now?? lol
georgehobica Dec 1st 2009 12:13PM
Tom, what I'm suggesting actually is that if it costs the airline $400 to fly that route and year after year they charge an average of, say, $300, then don't complain when they cancel your flight because of equipment failure (their planes are old, because we refuse to pay enough for our airfares to allow them to buy new planes); don't complain when the flight attendant is rude (she's on food stamps, and the airline eliminated her pension plan because we refuse to pay what the flight costs the airline to operate); don't be surprised if you pick up the paper one day and yet another major carrier has ceased flying (through bankruptcy or merger), because we refused to pay high enough airfares to keep it in business. That's all I'm saying.
Rick Seaney Dec 1st 2009 1:05PM
Jerry Maguire Moment?
Just a couple of tidbits for thought,
On the issue of costs going up in air travel since 1960 (inflation computation) let me point out a couple of things as we stroll through history:
< Start History >
1) In the 1950-60's the government set the price airline tickets
2) In 1960-70s airline reservation centers were staffed with humans that dropped marbles into glass jars representing planes to keep track of sold seats and tickets where written by hand and mailed via snail
3) In the 1960-70-80's there weren't any automated robots to build the bulk of airplanes, or CAD programs to design them, or outsourcing across the world for parts or heavy competition, engines were not as fuel efficient, winglets didn't exist and carbon offsets wasn't in wikipedia.
4) In the 1980-90s there was entire ecosystem of travel agents that provided the interface to passengers to purchase a ticket and plan their trips, they don't exist anymore except in corporate travel and niche markets as airlines removed commissions and the internet took over air travel and put them out of business.
5) In 2000's GDS had their distribution fees cut dramatically as airlines put "supplier web only" prices on their sites and used this as a bargaining chip to reduce distribution rates, next in firing line are credit card company fees.
Air travel IMHO is the most complex business on the planet, Safety, Security, Mother Nature, Labor Unions, Management, Airports, Entrepreneurs, Congress, Feds, Competition, Real-Time Quoting Systems, ...
And for the most part domestic airlines do a pretty good job of juggling hundreds of balls ...
And yet the following holds true:
100% of all air travelers want the cheapest price in reality less than 10% will get that cheapest price.
When you have a product where two people can sit side by side, one paying $1000 roundtrip and the other paying $100 roundtrip -- you have set yourself up for "whining" and to be honest it is pretty clear most airlines are immune to the complaining.
Tack on a bevy of new passenger fees and charge for ones that used to be "free" targeted directly at those paying the cheapest prices (as FF don't pay these fees) and again you have set yourself up for the whining.
I wonder how a legacy airline executive who is watching his favorite Sunday football team feels as he is inundated with commercials of baggage handlers lovingly waving buy to their "free" bags?
Are we shooting for a U.S. domestic air system where only the "rich" can afford to fly?
Is it really too much to ask (or whine about) the basics -- a clean, timely plane that lands with your checked bag, regardless of the price?
Business travelers have been paying $1,000 roundtrip for years and are now only complaining because their companies have slashed travel budgets and they can't visit their clients face to face to close that all important deal.
US Airways is pulling almost half of its seats out of Las Vegas early next year because it can't make money at what the public is willing to pay during a recession.
Raising prices "to what it is worth" isn't going to change that behavior.
The downstream consequences on Vegas alone are staggering and yet the city sees fit to add on a multi billion dollar expansion of McCarron (wonder who is going to pay for that?). http://cms.mccarran.com/dsweb/Get/Document-241330
Airlines in Europe like RyanAir and EasyJet make money selling $1 seats (outside of the global recession and poor investments in other airlines). Granted with a bevy of add-on fees http://wizzair.com/useful_information/service_fees/).
And let's not forget the government and airports who have their hands out, on a $100 connecting roundtrip airfare extract $7.5 sales taxes, $10 Security fee, $18 airport fees, $14.40 FAA fee, or approximately $50 (an additional 50%).
The bottom line is that air travel is a fragile ecosystem and defining "what it is worth" is more complicated than meets the eye.
Krishna Mandava Dec 1st 2009 1:29PM
I thought increased volume of air travelers and fuel efficiencies from newer planes would be a factor in this calculation instead of just inflation-adjusted prices.
georgehobica Dec 1st 2009 1:34PM
Krishna, fuel savings is one reason why we won't go back to $2000 coast to coast economy class fares (at least I hope not) , that and lower salaries for airline employees, the elimination of commissions to travel agents, all the new fees, and other factors.
Ellen Dec 1st 2009 3:36PM
Thanks for the history lesson, Rick. I love your website almost as much as George's!
The way the industry is set up now, I feel like I have to get my game face on when I consider flying - research trends in prices, verify which airlines fly to all airports within 100 miles, cross off all airlines who have screwed me in the past, watch my airfarewatchdog emails for a few months and pounce on my ticket the second I see an option that seems reasonable. My understanding is that any airline will take advantage of me if I give them the tiniest option, so I have to armed and ready to do battle.
I would gladly pay a little extra for a comfortable, hassle-free experience. Really! There's been a lot of talk about whether returning to govt regulation would improve our situation. I can't help but think that we may as well be regulated now - the major airlines all offer the same (crappy) service on the same planes for the same prices. Some rules about stranding a plane full of passengers on the runway for days, or making arbitrary changes to someone's itinerary wouldn't hurt, but each time that happens to a traveler, that person's percieved value of a plane ticket changes. I snatch up George's $98 fares because that's what the experience is worth to me - I wouldn't be able to bring myself to pay more! Give me GOOD options!
Rick Seaney Dec 1st 2009 4:21PM
Hi Ellen,
Your sentiment is very similar to what I hear every day.
Finding a good air travel deal is three parts diligence, two parts hobby and one part luck - we along with others are hoping to take the luck part of of that equation.
The most enjoyable part of air travel for many is seeing their destination airport in their rear view mirror -- this is because of breakdowns in the complex ecosystem that is air travel. Some airlines are consistently at the top of user polls, for a reason, they are very concerned about it (and not coincidentally they are typically profitable outside of $145/barrel oil and global recession).
I would differ with you however on re-regulation.
Without de-regulation in 1978 we probably would never of had airlines like Southwest and JetBlue and many of us would never have been able to afford the benefits of air travel (namely getting home or exploring the world) -- so I hope we don't end up back in the 1970's (although some former airline CEO's have been pounding the drum for returning to a modified form of regulation).
Certainly we want healthy airlines -- agreed -- tough to do in the current global environment however.
The number one driver of price and choice on a particular route is competition and clearly failed or merged airlines are not consumer friendly,
Cheers,
Rick
Fresh Airfare Dec 1st 2009 4:07PM
I agree with you George, I feel a little guilty when I see and/or purchase fares that I know are grossly unprofitable for the airline.
IMHO, air travelers are more peeved about the actual pricing practices than the prices. Americans dislike being nickel, dimed, taxed, tariffed...whatever you want to call it. It's in the fabric of their being. See Boston Tea Party, Republican Party, etc.
If the R/T price is $150, then tell them up front. Don't hook them at $100 and then add on $50 in fees down the line.
Couple this with some of the new security procedures and flying is riper for complaints from many air travelers.
I do not share their sentiment though. Fares are at an all-time low and there is no reason to complain about air travel. Just fly, fly and fly until prices rise up to where they should be!
georgehobica Dec 1st 2009 5:25PM
yeah, we feel guilty sometimes when we put up those fares because we know they're nonsensical. But other the other hand, it's what Airfarewatchdog.com is all about and we love saving people money. On the other hand, we're probably all paying a hidden price for low airfares. Anyone who owns a mutual fund with airline stocks in it? She's paying through the back end. Use an ATM? Well, when a bank loans an airline money and the airline goes bust, how do you think the bank makes up for that? Bank charges. And some airfares are supported by government subsidies in one way or another, which means our taxes. Everything is interconnected. Nothing is "free" forever.
Chris Dec 1st 2009 7:54PM
What would you say is a fair price?
I don't know if it's because there are no LCCs up here or what, but we in ANC all feel like we're being held hostage by high fares.
Alaska Airlines' systemwide cost per available seat mile was, last I checked, around 8 cents per mile.
AS just released their "Hot Deals on Ice" winter fare sale. They're offering the low, low price of 13.2 cpm on the ANC-SEA route.
That's $398 (plus tax) for the short flight to our nearest city.
Is that what you want? Tell me that isn't airway robbery!
Maybe I wouldn't be saying this if their CASM was 15 cpm and they were losing money at these fares, but they're making a 50% profit on their bargain-basement fares--not to mention the 150%+ they're making on their full Y fares! (This isn't a thin route, either--21 flights on 737s in each direction daily: that's 3,000+ seats coming and going a day!)
As you say, it's cutting back on discretionary travel for many of us. The difference here is that air travel is the only feasible way to escape here. Many of us moved here under the pretense of $99 or even $199 weekend fares being available (they were up until just a few years ago). Now, I'd gladly pay $299 if I could find it!
It's enough to seriously consider moving. Even if fares rise down your way, you can still hop in a car, bus, or train. Up here, that isn't an option.
But regardless, be glad you're still able to find these deals. This is what happens when you can't. It's not pleasant.
georgehobica Dec 1st 2009 9:42PM
Chris, you're right that Alaska Air charges a lot and I do sympathize. But even it isn't consistently profitable. At least it frequently ranks as one of the best airlines in reader surveys. It would be truly rotten if it had terrible service and still charged a lot. At the very least, make sure you sign up for their weekly promo code emails. Typically saves 10% or a bit more, hey it's better than nothing.
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Marilyn Dec 2nd 2009 5:28PM
I would be happy to pay somewhat more to have some rationality in pricing. When you are responsible, do your research, book your flight in advance you can still end up paying a lot more because you did not time your buy right. It feels like roulette.
I find it incredibly irritating that the system rewards the procrastinator who hits the market at just the right time, while I, being anxious that if I don't buy will end up paying more, pay considerably more. Yet I can't take advantage of the sale, as that would involve a change fee. To top it off, the person who got the fire sale price is likely to sit next to me and tell me how much they paid.
georgehobica Dec 2nd 2009 9:27AM
A tip: if you book on Southwest, JetBlue or Alaska, they'll refund a price drop difference in the form of a credit for future travel, without paying a change fee. Just one reason why these airlines always hit the top of reader surveys on airline quality and satisfaction.
JohnAAA Dec 2nd 2009 1:30PM
George, your reply to Tom implies we fliers are the ones who are in control of prices... (...because we refuse to pay enough for our airfares to allow them to buy new planes);...flight attendant is rude (she's on food stamps, and the airline eliminated her pension plan because we refuse to pay what the flight costs the airline to operate....) What a twisted way of thinking!!! You must be different than me because I don't get to negotiate price!
I don't fly often, and now when contemplating it, it turns my stomach due to how I am treated by some TSA and airline people. I travel only when I have to, and knowing TSA and airline people are regularly getting reamed and are likely grumpy, few things are in my power. One is to find the lowest price offered. Unless by way of Priceline, where I DO have a say on the price I pay, the only thing I can count on is that I will pay what they charge me. I have to watch out for myself, and keep my money in my pocket. As a matter of fact, due to other charges slipped in when family used a credit card for Kiosk checkin, I will now use my AAA identification card instead. We all need to be aware of the slippery stuff!
On the other hand, when I am traveling, my attitude is mine to control. I try to protect it and help others get above the low stuff that happens. I almost always pack extra sandwiches and food to share. I try to be friendly. I try to be understanding for those who are having problems (as opposed to those who are being problems, who I pray for, instead) and try to help if I can.
Now, as far as Airlines go, it is a business, and there are many things involved. There used to be an old school thought that by providing a service well, you can be paid well. So, what is the service we should be able to count on? What do we "value" and are willing to pay for? How about this: 1. Having enough room to be considered human and not cattle. 2. Not being bumped, canceled, or left on a runway for hours. 3. Being treated with respect and not being whipped with "rule"s or "I can't do anything about it". 4. If I have a problem, I would like for someone to help resolve it asap. A human, not a touchtone phone with endless loops and holds and finally leave a message.
There are many of us out here who run a business, and know that if we ran our business like airlines currently do, we would be OUT of business quickly. Maybe the airline businesses that are going broke are going broke because their high paid executives don't know they are REALLY doing?
George, Please don't say that it is my fault that staff are on welfare at an airline... because I don't pay enough. I AM NOT IN CHARGE OF PRICES or employee PAY.
There are airlines that are coming back to be service oriented. I would warn them about charging per piece of toilet paper or anything else equivalent.
Oh... and please don't take away my ability to pack up extra sandwiches for my row mates. This too would really be going backwards.