A couple of weeks ago, I had a fascinating conversation with my best friend Ari. We talked about the emergence of Hulu TV as a possible industry-shifting change for cable companies, and the need of other companies to shift their business strategies or possibly risk going out of business. We discussed this new competition as a positive, forcing existing entities to become more consumer friendly to retain customers. The conversation moved on to other industries, barriers of entry, and how different strategies forced evolution to better “perks” for the average consumer, industries like credit cards (with their signup bonuses and cash back awards) and television (both hardware and programming). Then we spoke about the airline industry, and all of those things went out the window.
In the United States, the airlines seem to be on a race to the bottom, rather than the top. New less consumer-friendly strategies are adopted by one, and the others race to copy those, and then act in ways that are even worse.
So where has this race to the bottom come from, and how can it be quantified?
In 2016, MooseRoots conducted a study of airfare ticket pricing trends since 1963. Looking at domestic airfare prices from several major markets, ticket prices have outpaced inflation, though not by as much as most would think – roughly 5-33% depending on market. (For comparison’s sake, the price of sports cars has risen by more than 50% after adjusting for inflation, while some food staples have actually decreased in cost relative to inflation.) However, those prices don’t tell the whole story.
Taking the three legacy domestic carriers separately for a moment (that’s Delta, United, and American), as recently as twenty years ago, tickets included reserved seats, meals, checked luggage, and one mile in their frequent flyer programs per mile flown (more if one was in business or first class). Today, those fares – which are slightly more expensive relative to inflation – include at most simply the reserved seat. Meals and checked luggage are available for an additional cost (not factored into the referenced study) and frequent flyer programs for all three airlines have changed to give miles reflective solely of dollars spent rather than distance flown (a disadvantage to all but first class flyers domestically).
How is it that an entire industry decided to offer less for – objectively – more money? The answer is, unfortunately, fairly simple in my eyes.
In the 1960s, air travel was relatively new. It was exciting, and it was an experience that was valued. My grandparents told me that they used to dress up (my grandfather would even wear a jacket and tie) to board a flight. With the advent of “budget” airlines like Southwest and, later, Spirit and its ilk, air travel was instead rendered simply a means of transportation. No longer was the experience valued by consumers. So rather than differentiating themselves from the budget carriers by offering more, the legacy airlines fell over each other to offer less.
Meals were the first to go. (To be fair, Delta and American have actually brought free meals back on a very few select transcontinental routes.) Next, as we all remember, came checked bags. At this point, Southwest changed its marketing from one based on lower fares to one based on free checked luggage, and actually began charging more on many routes than its competitors. Frequent flyer programs devalued, and as one airline did so, the others followed suit.
The newest trend today is what is known as “basic” economy: the equivalent to the true budget carriers where seats are now assigned at check-in, and access to the overhead compartments is restricted. And hey, since it worked when unveiled by one carrier, the others have, again, followed in their race to the bottom.
Is it collusion? I’m not in a position to say. What is obvious is that there is zero incentive for any of the airlines to offer anything additional, knowing that even if one is able to convince customers that complimentary non-alcoholic beverages are going to cost extra or that a couple less inches of legroom is ok, the others will happily do the same. Innovation in the industry is in how to convince paying passengers to pay more while receiving less and to be ok with it. And we, the consumers, have gone along.
So what can we do about this epidemic of mediocrity? The answer is hard. In 2010, a new passenger “bill of rights” was adopted by the Department of Transportation, mandating heavy fines to airlines for things like keeping passengers delayed either on the aircraft or in an airport for more than three hours without food, water, and access to a clean lavatory. (You’d think these things would have fallen under basic decency, but you’d have been wrong.) The fact that it took government intervention to simply ensure that stranded travelers were offered the bare necessities to survive says to me that it will take the government again stepping in to have competition move in a direction favoring consumers and not simply the pockets of airline executives and shareholders.
Right now, airlines can – on a whim and with no warning to customers – make all those lovely miles you’ve accumulated over the years through their frequent flyer programs worth less, or even worthless. They can decide to charge extra for nearly everything. (Did you want to sit next to your family member? Did you want to watch a movie? Did you want to bring food on board with you so as to not buy an overpriced bag of trail mix from the airline? All these things could easily come with price tags soon.) They can cancel flights with no obligation other than to offer alternative arrangements. And don’t even speak of the always-accepted practice of overbooking flights and involuntarily bumping passengers. (In 2015, domestic carriers bumped 46,000 passengers.)
In order to at least assure some of these things remain or become consumer-friendly – like only canceling flights due to necessity, not due to lack of booking, which now they can do – it will take each of us lobbying our representatives. Insist on a more comprehensive passenger bill of rights, and for restrictions on what airlines can charge extra for. (Cruise companies, for instance, are only allowed to charge fuel surcharges as oil prices exceed a certain level. Perhaps the same can be done with airlines charging for checked bags only as revenues decrease below a certain level. Just a thought.) Lobby to have frequent flyer miles protected as a form of currency, not subject to devaluation on the whim of airline executives with no notice.
While currently our airlines are on a race to the bottom, we can, as consumers, insist on more, and work with government to see it happen.
Note: all photos taken from inside airplanes are mine. While the industry may be headed in the wrong direction, the view is still good!