Air travel as an entitlement
When did air travel become an entitlement where all travelers, regardless of what they paid for their basic fares, should receive the same services at no additional charge?
Air France, KLM and it appears Southwest Airlines as well are charging obese passengers for an extra seat. All Canadian airlines, on the other hand, have been ordered by the Canadian Transportation Agency (CTA) to provide an extra seat at no charge to such passengers. The CTA also ordered all Canadian carriers to provide an extra seat at no charge to companions of travelers with severe disabilities. Obviously, there is a greater sense of entitlement in Canada than elsewhere.
Micheline Maynard, writing in last Sunday’s New York Times business section, stated: “In the space of 18 months, the concept of a plane ticket has been transformed from an all-inclusive purchase to a pay-as-you-go plan, turning the relationship between airlines and customers increasingly sour.” If the relationship has soured, it is largely because of the passengers’ sense of entitlement.
Ms. Maynard added: “Every time a passenger books a ticket, it seems, major airlines have come up with more ways to charge for what once was free”. Just because the airlines lacked the sophistication in the past, and now are learning, doesn’t mean that passengers should be entitled to more than for what they pay.
Ms. Maynard is wrong in terms of the timing. Since the introduction of two classes of service, which dates back many decades, passengers have not been treated the same, and passengers have had a choice. With the introduction of deep discount fares in the mid 1970s, passengers could book cheaper fares as long as they were willing to meet certain conditions, such as payment in full 14 or more days in advance, Saturday night stay-over, and non-refundability.
People Express, one of the pioneer low cost carriers (LCCs), charged for checking in bags and for food. Ryanair, a very successful LCC in Europe has been charging for everything, and has even speculated about charging for the use of washrooms on-board flights.
Air Canada was the first major airline in the world to introduce a la carte pricing, whereby passengers could choose from among four or five fare categories and add or delete various services/amenities. This provides passengers with the ability to pay only for those services they prefer. Air Canada started this in 2006, well before the U.S. and other international airlines started unbundling their basic packages of air travel.
Ms. Maynard quoted Paul Hudson, the executive director of the Aviation Consumer Action Project: “I frankly think the airlines are going to find that these unbundling gimmicks do not work.” He is wrong!
Economic theory describes the value of price discrimination and market segmentation. The airlines have finally caught on. Unbundling does work!
Consumers prefer choice, and for most goods and services, they are offered plenty of choice, without the same backlash that airlines face. Automobile companies have been at the forefront of market segmentation and unbundling. They have progressed a long way beyond the old model T Ford which was available only on black.
Hotel chains offer consumers a wide range of choice and prices. So too do most consumer product companies. Check out the Dell web site for an excellent example of a la carte pricing. Yet no one complains that every consumer should be able to have the same type of computer regardless of the price they pay.
Airlines finally are catching on to what many other industries have been doing for years, and are beginning to learn the value of market segmentation and unbundling. They still have many kinks to work out, and they will.
Every person has different tastes, different income levels and hence different willingness to pay. So there is no reason to expect that every consumer will or should be offered only one choice for each product or service. There is an important lesson here for health care. But I will leave this discussion for another day.
The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.