The latest salvo against the airline industry came recently when ultra-low cost Spirit Airlines announced a sensible proposal to charge travelers’ for carry-on baggage. Without delay the popular media, including one of my favorite reporters—Neil Cavuto—who berated Spirit’s CEO on air about this fee without listening to his rationale, along with supposed in-the-know bloggers, bit into this news with ferocity and overwhelming negative criticism. Lost in the clouds, is the positive impact of this proposal and the continuing trend of airlines unbundling fares.
The unbundling of air services is indeed the best news for air travelers’ since deregulation in 1978. According to The Concise Encyclopedia of Economics by Alfred Kahn; airfares have generally dropped 30 percent since deregulation, saving travelers’ $5 billion to $10 billion per year. I expected that these new charges will generate even greater cost savings.
This is all about equality. Spirit Airline’s scheme to charge for carry-on baggage is fair and supports the best interest of air travelers. Unbundling of base rates offers consumers transparency, choice, flexibility and only charges travelers for the services they require. Basically, it charges consumers the cost for the options they select. It doesn’t force them to subsidize their seatmate’s flight. What is more fair than this?
Under the old model airlines bundled everyone together, charging you for a meal when you didn’t want one, or charging you for excess fuel consumption from weight-laden luggage when all you have is a backpack.
Essentially, airlines are responding to free market dynamics. The exceptionally low fares offered for the past 10 years were obviously unsustainable. The International Air Transport Association stated in December 2009 that airlines have lost $49 billion since 2000. Facing demise, insightful airline executives figured out that they could increase revenue while offering customer’s enhanced choice and control over the cost they pay to receive air service.
Although capitalism has become a pejorative noun recently, there is no denying that a business needs to operate profitably to continue as an ongoing enterprise. Therefore, airlines are simply responding to the consumer’s requisite for low fares at the same time maintaining fiscal responsibility. Now before, chants of overpricing are levied at this claim, consider that Spirit Airline concurrently announced with the carry-on fee, fare reductions averaging $40, and for their $9 Fare Club members, fares as low as low as a penny plus fuel, taxes and fees. A Ph.D., in economics is not necessary to realize that those fares don’t offer much profit.
Spirit’s recent announcement echo’s a clear message from the airline industry as a whole — we will no-longer gouge our loyal customers at the expense of a mooching traveler. Indeed the transformation of airline pricing will sting a few travelers. However, those stung, offer little if any value to an airline. Those most likely to be affected by these fees are the same travelers that scour the web for the lowest fare without regard to the concept of reciprocity.
This is a clear case of be careful of what you ask for. For years, the typical travelers’ demanded low fares only persuaded by which airline offered the lowest fare. At the same time, savvy travelers’ recognized the significance of loyalty. Incidentally, the importance of loyalty is enhanced with these fees.
As previously stated, airlines are become more responsive to market forces. As such, they are rewarding those who are willing to build mutually beneficial relationships with them. For example, if you hold the lowest level of elite membership with most airlines, including Delta Air Lines, United Airlines, and American Airlines, your baggage and most other ancillary fees are waived. What does this mean to you? You and in many instances your traveling companions can check-in a bag without a charge, or proceed directly through security screening without delay.
The negligible price for these perks—loyalty.
In the past one might argue that elite membership is only available to frequent fliers. This is no-longer the case. These days elite qualification can be earned through affiliated credit cards, earned bonus miles for certain flights, partner airlines, and the newest tend is Delta Air Lines allowing members to apply excess qualifying miles from one year to the next year’s qualifying period.
Realistically, if you fly at-least three times a year there is no reason why you should not hold elite membership with an airline. If you make less than three annual flights, the fees only modestly impact your travels. As I describe in my book The Penney Pincher’s Passport to Luxury Travel the route to elite qualifications is easy—select the airline that will best serve your needs and remain steadfastly loyal to them.
In exchange for safe inexpensive passage to the world, airlines seek a symbiotic relationship—is that too much to ask for—I think not.