Airline mergers could lead to fare “creep”

by Tom Johansmeyer on

The Southwest/AirTran merger isn’t expected to push fares much higher. The disappearance of seats that comes with airline consolidation would make you think that prices are about to rise, as the fundamental commodity of the airline industry becomes increasingly scarce. But, we’re not close to that point yet, notes USA Today:

“We’re not at the tipping point,” says George Hobica, founder of Airfarewatchdog.com. “I don’t think fares will be impacted much until we have three legacy carriers and one discount carrier remaining.”

The number of seats, however, is shrinking across the airline industry. Since September 2007, the number of domestic seats available has fallen 10 percent.

According to Hobica, look for fares to “creep upward,” but not at a rate that will horrify customers, a position supported by Frank Werner, associate professor of finance at Fordham University. He tells USA Today: “Generally, airline mergers remove competition from the skies, leading to higher prices. This will happen in markets where the combined Southwest/AirTran will not have a dominant market share.”

[photo by SkilliShots via Flickr]

Airlines continued to cut jobs – 25 months in a row

by Tom Johansmeyer on

There’s a reason why airlines have positioned themselves for a solid performance in 2010: in addition to charging all those extra fees, they have been cutting positions (and thus expenses). In July alone, the industry in the United States trimmed 2.3 percent of its workforce relative to July 2009. That made 25 consecutive months of net job losses in the domestic airline sector.

According to the Department of Transportation‘s Bureau of Transportation Statistics, 378,100 people were employed full-time by the airline industry in the United States in July 2010, a decline of 8,700 from July 2009. Five of the six network carriers cut positions, with Delta adding headcount only because of its Northwest acquisition. Only two low-cost carries reported net cuts for this period (Southwest and AirTran).

According to the Associated Press, maintenance and ticket agent positions are getting hit most:

While the number of in-flight airline employees like pilots and flight attendants is regulated by the Federal Aviation Administration, the bulk of airline employees-maintenance crews, reservations and ticket agents-work on the ground and aren’t subject to federal minimums. Airlines are operating with less staff to save money, but they’re also outsourcing maintenance and other work to other countries where labor is cheaper.

[photo by aflcio via Flickr]

Five reasons passengers looking for more than just a ride

by Tom Johansmeyer on

As airlines cut routes and amenities while increasing fees, travel through the skies became a true labor. Sure, the cuts came as the result of market pressures that led to compensation reductions and other changes, but it also brought a problematic perspective. Somewhere along the way, it became acceptable for airline employees to claim that “you get what you pay for.” With low fares, essentially, you can expect substandard service.

Indeed, there is some truth to this. If you buy cheaper furniture, for example, you may be sacrificing quality to save a few bucks in the near term. We make these tradeoffs every day, and there’s no reason why a purchase from an airline should be any different. It’s clear that the standard has been set: you’ll pay less, and you’ll get a much lower level of service.

Take this concept to its ultimate conclusion, of course, is paying for physical movement, and you’re entitled to nothing else, despite the presence of beverage carts and headphones … not to mention employees who should provide a certain amount of customer service. I saw an interesting tweet to this effect not too long ago, claiming that transportation from Point A to Point B safely is what you’re paying those low, low fares for. But, I’m not so sure about that. There is so much more that’s explicit and implied in the air travel experience, and it’s delivered often enough that it should be expected.

So, why should we expect more than simply being taken from Point A to Point B? Well, here are five reasons why airlines are more than long-distance taxi services:

1. The airlines promise more than physical movement: Drinks are served on flights. Food is sold (or offered, depending on class and destination). There are movies and headphones and blankets and pillows, either free or for a fee. Whether you have to pay, in this regard, is irrelevant. The offering of amenities means that there is more involved in the transaction than the delivery of a seat from one place to another. So, something more than safe movement from Point A to Point B is implied.

2. Nobody wants substandard service: Basic customer service, which you can find on airlines only inconsistently, is expected in virtually every business transaction. While it doesn’t seem like much, this is an increase above the “physical movement” included in the price of a ticket.

3. A mere ride would (theoretically) cost less: Given that there are some services that could be sacrificed, a genuine low-cost, no-frills experience would cost less than existing flights. There would be no in-flight entertainment, no beverage service and no magazines tucked behind the seats. Rather than flight attendants, you’d have “safety professionals” (like lifeguards) who would only spring into action in the event of an emergency.

4. Low fares can still mean big money for passengers customers: While airline industry employees may drive home how cheap it is to travel these days, let’s not forget that unemployment is still through the roof, even if the recession did end more than a year ago. There are still plenty of mortgages at risk of delinquency and foreclosure. Simply put, the economic situation in this country is still dicey, and a little money is a lot when you don’t know how long you’ll have your job. Every dollar matters more to the consumer than it used to.

5. We’ve seen the possibilities: For everyone who has had a problem with a nasty flight attendant or a gate agent with a horrible attitude, you can find a story about one who helped someone out of a bind. I’ve had fantastic service on airlines that have reputations for anything but. And, some carriers have differentiated themselves through service (JetBlue and Southwest come to mind). We know it’s possible for airlines to do better; we’d just like to see it more.

[photo by UggBoy via Flickr]

Four reasons airlines blame passengers for their current woes

by Tom Johansmeyer on

It would be so much easier if we’d just pay more, right? That’s what the airlines seem to believe. It’s impossible for them to turn consistent profits because we just won’t accept higher prices. And, kicking the poor off the plane doesn’t seem to be an option.

I got up this morning and read George Hobica’s hilarious “interview” with Wilbur Flywright, CEO of BrokenWings Airways. In it, I was treated to one airline industry cliché after another. To see them all in one place, it was either eye-opening or strangely reminiscent of an ambitious gate agent’s Twitter account.

Here are the four reasons, according to “Flywright,” airlines blame us – the people who pay their bills – for their inability to run well, despite the fact that some (e.g., Southwest and JetBlue) have actually found a way to thrive.1. We won’t pay more: Of course, I don’t know any industry in which customers pay more than is necessary … at least, not purposefully. You may get suckered at the used car lot, but you don’t go to your local grocery store, demand to see the manager and explain to him, as though he ate too much paste in his youth, that eggs really should cost 34 percent more.

2. We have alternatives: When air travel is inconvenient or expensive, we can take any number of cheap bus services or even drive. Frankly, it takes a strange turn of events to get me on a plane to Boston or Washington, DC.

3. “We” deregulated the industry: It’s the law of the land, and in theory, passengers are voters (we’re indirectly responsible). So, we “imposed” a free market on the airline industry … the nerve of voters in a free society! It may have happened more than 30 years ago, but we still hear airline people gripe about it, even if they were of single-digit age when the transformation occurred.

Hint to airlines: Don’t blame passengers for deregulation – I was only a year old at the time. I assure you, I had nothing to do with it, likewise most of my friends. If we could have done something about it we would have. Also, don’t talk about it as something that killed (or at least maimed) your industry. It was 30 years ago, you need a new lamentation. How about poor customer service levels?

4. We made the airlines cut stuff: Since we won’t pay a “fair” fare, the airlines have had to make cuts. Routes, employee compensation, amenities (if you can call them that) … we now have to pay for what we want in the form of fees.

Taking fees and deregulation together, I just loved this:

So what did we do? We eliminated service. We cut salaries and benefits. No more little plastic wings for the kiddies; if you remember those, then you remember that the cheapest roundtrip coach fare from New York to Los Angeles in 1959 was $231, or about $1,800 in today’s dollars. And if you remember that, then could you please shut up about the fees?

And occasionally, there’s a good point:

Ah, the fees. Can we agree on just one thing? If your neighbor moves, you aren’t going to pay for it, right? No, of course not. Not unless you really wanted him gone. So why should you pay for the jet fuel consumed by some moron who’s flying a 100-pound steamer trunk across the country in our baggage compartment?

[photo by leafar. via Flickr]

Customer service slams airlines in overweight passenger policy enforcement

by Tom Johansmeyer on

Airline rules for passengers who take up more than one seat are neither new nor surprising. Forget about passenger comfort (the airlines already have, of course), it’s a financial issue. A passenger who takes up more than one seat is consuming a scarce resource (in the economic sense): seat 42A on Flight ABC123 on July 29, 2010 can only be sold once. If it doesn’t bring in any revenue, it never will. So, charging bigger passengers extra is a prudent financial move. Yet, this is only part of the problem.

Goodwill on the planes, in an effort to make overweight passengers more comfortable and avoid embarrassing situations, is resulting in uneven policy enforcement, which costs the airlines cash and makes instances of seemingly unfair treatment even worse.

And, the prevailing attitude in the marketplace seems to support this thinking. Even passengers affected by this policy are on board with it, so to speak, as one passenger noted in a letter to USA Today’s “Traveler’s Aide”. The problem is enforcement, which tends to be a tad uneven. The passenger noted in his letter:

The flight attendant had moved another large man to the outside seat in that row so there was a space between us. The agent told me I could either pay for a second seat or get off and wait for the next flight to New Orleans. I opted to pay and go home. The gate person embarrassed me and asked for my credit card, but didn’t require the same from the other large passenger.

The passenger was upset with how the Southwest flight attendant handled the situation. Of course, this airline is no stranger to high-profile gaffes with big passengers. Some passengers are able to get away with spilling into a second seat, while others are stuck shelling out for an extra ticket. And some simply don’t bother, and they invariably are seated right next to you. For the airlines, the challenge is in figuring out who should have to buy an extra seat. According to USA Today, “That means Southwest agents end up eyeballing those arriving passengers and guessing whether they comfortably fit into seats-without actually seeing them seated.” An overweight passenger may slip through the cracks on one flight but could have to pry open his wallet on another.

And, there is a bit of awkwardness involved:

“Without question, approaching a customer with unique seating needs who is unaware of (or has ignored) the policy is incredibly difficult,” says Southwest representative Christi Day. “However, with the use of discretion, tact, and genuine concern for customer comfort, approaching those with a clear need for additional seating is critical for ensuring that another customer is not subjected to an uncomfortable flight.”

Perhaps the greatest problem for the airlines – and I can’t believe I’m actually writing this – is that they’ve been too eager to accommodate. Customer service … good customer service … leads the airlines to give away an extra seat instead of charging when possible, or at least trying to misjudge in favor of the passenger. Or, maybe they just don’t want horror stories winding up in the hands of travel bloggers. Whatever the motivation, trying to help passengers is what leads to uneven enforcement. The inequity, of course, makes the slip-ups look worse than they are.

The solution is simple: stop the goodwill. When in doubt, charge for a second seat. It’s really that simple.

[photo by Willie Lunchmeat via Flickr]