Monday, May 12, 2014

Why we should all love airlines and their added fees

Stormy weather approaching a Lufthansa plane parked at Frankfurt Airport in Germany
If you’ve flown anywhere recently, you’ve likely encountered an agonizing security screening experience, extra fees for everything from your bag to your meal, and overcrowded flights.  Since the 9/11 attacks, security has been tighter than ever, requiring passengers to remove shoes, take out laptops, and proceed through onerous imaging technology.  Airplanes are more crowded than ever as airlines cut back on capacity as they retire older less fuel-efficient planes.  When storms hit and airlines cancel flights, it can be challenging to find new flights in a reasonable time.  Checking in at least one free bag and eating a free meal on your cross-country flight were once birthrights.

Despite new aircraft like the Boeing 787 and the Airbus 380, the passenger experience seems to have gotten progressively worse.  Undoubtedly, you’ll overhear comments from older passengers like “flying used to be so much more luxurious and pleasant.  What happened to the good old days?”

The truth is that the good old days have always been there for airline customers.  The same is not true for airlines.  Between 2001 and 2013, US airlines lost $50.6 billion.  A famous line in the airline industry goes something like this: “Do you want to know how to become a millionaire?  Invest a billion dollars in an airline.” In the US, 51 airlines went through chapter 11 bankruptcy since 1979, including almost all of the major carriers.  The last decade was one of the largest transfers of wealth from airline investors to customers, the government, employees, fuel companies, and aircraft manufactures.

Where the price of a ticket goes - source: http://www.airlines.org
Airline customers on the other hand have seen ticket prices fall 50% with inflation-adjusted dollars between 1986 and 2010 due to deregulation and better fuel efficiency.  Compared to other goods and services, airline fares have risen much slower:

Good or service
Price change (1978 to 2013)
Walt Disney World Single Day ticket
1,362%
College education, public, undergraduate
1,193%
Single family home
377%
Consumer price index
257%
Domestic air travel with fees
108%

Although we hate fees for extras, like checking in the first bag or eating meals on longer flights, in the past, all passengers paid for these services whether you used them or not.  Those who didn’t check a bag subsidized those who were.  By unbundling these services, only those people who value those extras pay for them.

The next time you’re on a flight and you’re feeling aggravated due to having less leg room and the countless other annoyances, take a moment to remind yourself how amazing it is to be sitting in the air at 30,000 feet and cruising at 522 mph.  Then think of how the airline investors have bankrolled your flights for the last three decades.  How could you feel anything but love for the airlines?

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