SAN FRANCISCO – Return for a moment to 1981 and the dawn of airline deregulation: People Express launches a no-frills service with $29 regional one-ways and $99 coast-to-coast fares cheap enough for almost anyone to fly.
To keep fares low, the discounter forgoes in-flight meals and charges 50 cents for sodas and $2 for a snack pack of salami, cheese and crackers. It earns the nickname “People’s Republic Express” as passengers jam aisles bearing all manner of carry-on items short of caged chickens to avoid a $3 fee per piece of checked luggage.
Leap ahead to mid-2008: Travelers can still book coast-to-coast roundtrips for $198 (if you simply adjusted the same 1981 airfare for consumer inflation over the years it would be about $500 today) and add-on fees are now the industry norm. It’s no wonder airlines are squeezed when we’re paying 40 cents on the dollar nearly three decades later.
Call it the free market meets the tyranny of the masses armed with technology. Consumers wanted cheap fares, the Internet gave us the instantaneous means to find them, and now our tightfistedness has brought a vital industry to the verge of collapse.
Even consumer advocates acknowledge the anarchy that’s resulted 30 years after the Civil Aeronautics Board stopped setting fares and routes. Deregulation has spawned a second-rate system offering little more than Greyhound buses with wings that make five or more often-late stops daily throughout the country to keep seats filled.
“In many ways we’ve seen the enemy and it is us,” concedes David Stempler, president of the Air Travelers Association. “We’re not willing to pay for better services yet we fully expect them.”
Sleazy survival tactics
To avoid massive losses or bankruptcy, airlines have resorted to charging a host of extra fees that People Express executives might have found deviously ingenious. The reason: They’re such slaves to fare search engines they don’t dare risk raising ticket prices and getting underbid by competitors.
“They can’t raise fares because they have no pricing control,” Stempler says. “It’s not that they don’t have the courage; it would be business suicide to fall out of lockstep.”
Instead, most airlines are nickeling, diming and fifty-dollaring buyers with fees hidden from search-engine sweeps to give the almighty consumers what they demand — except it’s now the illusion of the best-available bargain.
Consider the scope of a la carte pricing on services previously included in ticket costs: $2 sodas at US Airways, $7 for a blanket and pillow at JetBlue, $40 for a “choice” window seat on Northwest and $50 for a second checked bag at Delta. As one blogger on travel-rants.com wrote: “What’s next, charging me to go to the toilet?”
In the height of audacity, several airlines are using the industry’s weak on-time performance as a revenue enhancer by charging extra for seats in the first two rows of coach. Their target market: Travelers needing to catch a connecting flight who fear that they won’t deplane quickly enough if they’re seated in the back rows.
Yet U.S. consumers complain about the airline industry like we do Big Oil when it’s our craving for the absolute lowest prices that’s crippled the industry.
Somewhere in the last 25 years, Americans came to believe cheap air travel is a right to which we’re entitled just like we did cheap gas — until that train left the station. With jet-fuel costs up 50% in the last year, we’re awakening from a similar greed.
The Southwest paradox
Southwest is held up as the stellar example of a profitable airline. It’s avoided resorting to tack-on fees thanks to a hedging program that’s helped contain fuel costs. Yet it typifies what’s bad about the post-deregulation era.
Southwest planes reportedly make up to seven stops a day. Passengers on some flights from New Orleans to San Francisco, for instance, suffer through three stops and plane changes before reaching their destination — meaning they’ve been in five airports in the course of their trip.
Competitors have been forced to move toward Southwest’s model, leading to a steady disappearance of nonstop, long-haul flights throughout the United States. What we’ve gained in savings by patronizing the likes of Southwest we’re losing in time and convenience.
Says Tom Parsons of bestfares.com, an avowed Southwest admirer: “The three biggest enemies to airlines today are fuel costs, the Internet and Southwest – a smart, lean, mean flying machine.”
Attacking the oppressor
The vast a la carte fee structure that’s developing may be the industry’s bid to neuter the search-engine system that it ironically welcomed to cut tens of thousands of reservations jobs and cut out the commissioned travel-agent industry entirely.
Since add-on costs vary by airline, consumers using search engines have no way of knowing the additional fees to which they’ll be subjected without contacting the airline before booking online. There’s no law requiring upfront disclosure of these junk fees akin to those that banks impose, yet legislated disclosures are likely on the horizon.
No one would suggest returning to a strictly regulated system. Still, Congress needs to address such glaring problems as widespread flight delays. Free-market advocates will object, but millions of business travelers would welcome more on-time flights as would the U.S. economy to remedy lost productivity.
Consumers best prepare for costlier air travel from now on if they don’t want the system they’ve enfeebled to collapse entirely.
“One thing worse than high fares is no fares because you’ve lost airline service,” Stempler says. “It might be better to tolerate higher fares now so we don’t end up with fewer carriers and less competition in the marketplace.”