When I think of all of the businesses that I might want to be involved with, the airline industry is down near the bottom of my list. Massive government intervention, public ownership, reliance on a wildly fluctuating fuel cost, overcrowded marketplace, customer service nightmares, unionized unhappy employees throughout the organization. Wow! But it still amazes me that the executives in charge of the majors take their eye off the ball so often.
Doug Parker, president of US Airways, crowed that the carrier was making $400 million per year on ancillary fees. Never mind that the industry continues to lose money. Never mind that US Airways lost $100 million in a recent quarter and saw its revenue drop over 13%. United Airlines makes $14 per passenger in ancillary charges, but lost $382 million in Q1 2009.
Never mind that the average consumer is tired of being nickled and dimed – window seat, head set, cut in front of the line, extra 5 inches of legroom, snack, soda, more miles, checked bag, overweight bag, travel on a busy day, talk to a ticket agent, redeem a frequent flyer award – all of these cost extra on at least one major airline (excepting Southwest). The whole travel experience is now so convoluted that some people have decided that the hassle of air travel is just not worth it. I have had 4 opportunities this year to travel that in years past I would have chosen to fly. Not this year… my rule has become only fly if necessary.
From a customer service perspective it is a disaster. Every time you need to talk to the company, they want your credit card. Their eagle eyed bean counters (and remember that I usually love bean counters) are crowing about the new revenue, but aren’t looking at how many people have stopped flying. That seems to be to be a bigger issue.
I mentioned earlier that Southwest has not moved to a la carte pricing. They haven’t had a losing quarter this year. Maybe that should tell the bean counters something.
Even in areas outside of the airlines, we see the same “logic”. I tried to buy college football tickets online last week. The website gave me two options for delivery. Print them out at home for $6 or pick them up at Will Call for $3. In neither case, did the college incur any significant additional cost, but there was that ancillary charge. Guess what, I didn’t purchase the tickets over the internet. Oh well.
For those of you out there looking to break down your pricing to provide a more a la carte menu solution, I would recommend really investigating whether you will achieve the goals that you hoped by doing so. You may be much better off by playing the Southwest to the majors.