My brain got bored last night and started in on thinking about airlines. I tried to distract it using various methods but it insisted on thinking about airlines. Fuckin' brain.
Airlines are facing some pretty heavy problems here in the era of expensive oil. Some of these problems are self-inflicted. Southwest and Continental were smart enough a couple years back to start aggressively hedging the price of oil. As a result, they aren't (presently) getting killed like pretty much everyone else. Doing this was such a no-brainer it isn't altogether surprising that the airlines missed it ('cause they're pretty good at missing no-brainers). It's like they believed their bullshit spin on how they were dying due to the cost of labor and unions are evil, etc. that they forgot to look at what actually could kill the business model. Which turned out to be, duh, oil. It's hard to fathom that the price oil was something only a very small number of airlines realized was the critical input for them and, as such, they should engage in some serious risk management to protect themselves as best they can from shocks to the price of said input.
As with some of the supply chain stuff I was prattling about the other day, the spike and ongoing upward trend in the oil price is, in fact, slamming airlines but some bright kids are gonna figure out that, as with any business shock, there are opportunities to kick the tar out of your competitors.
This little orgy or business geekdom was triggered by the news over the weekend that airlines are now going to return to imposing overnight stay restrictions and such on their lowest fares. The primary reason for doing so is they don't want the day trip business traveler to get the lowest fare, opting instead to use those to get families, etc.
Right impulse, utterly wrong tactic. If you think about it just a little, the head spinning silliness of this approach knocks you on your ass.
We've seen airlines engaging in all sorts of practices lately to generate revenue, specifically revenue that recoups costs that used to be bundled into the ticket price...selling snacks and now beverages. Charging for the first checked bag (stupid, stupid, stupid, stupid...you are going to see people trying to bring small cars on board now instead of checking them...as a result, on-time takeoffs are going to get killed). In addition, airlines are doing things like stripping unneeded paint off their planes to lower the weight. And there's the core of it...airlines need to minimize the weight they carry on any individual flight while maximizing the revenue per seat and the number of seats filled. Let's assume the average checked bag is 50lbs. The average carry-on is 25lbs. The average purse, laptop bag, briefcase is 7lbs. Carry on food and water is another 2lbs. So...you're an airline...what do you want? Do you want most a married couple with one checked bag, two carry-ons, a briefcase, a purse, a 2liter bottle of water and a bag of McDonald's flying from St. Louis to Chicago where they get a connecting flight to Miami? Or do you want one guy with a briefcase taking off in the morning from St. Louis to Chicago and flying back that night? Assuming said guy with briefcase isn't obese...you want that one guy and as many others like him as you can get. Sure...charge him more for it but I'd do what I could to make sure that he can still find that little nugget deal by booking far enough in advance or whatever so you keep that guy and get as many others like him as possible.
Above I touched on another thing that the price of oil should have the airlines looking at...minimizing the number of takeoffs per passenger. Like cars that accelerate hard, planes burn alot of gas during takeoff because of the acceleration. With the hub system that so many airlines use, you are essentially forcing your takeoffs per customer arbitrarily higher (see our couple above who went from St. Louis to Chicago to Miami as opposed to St. Louis to Miami). Sure, the hub system allow you to maximize the number of filled seats per flight (out of the hub, anyway). However, it does nothing on some of your other metrics...metrics that have become more important as oil as shot up.
There are also impacts in terms of marketing. Maybe...maybe there's an airline out there with the stones to actually charge based on lbs. per customer (defined as the human's weight, the weight of checked baggage, the weight of all carry on items)...but I doubt it. So...who's more expensive for you to carry...a 120lb woman with a 50lb checked suitcase and 15lbs of carry on crud? Or a 200lb guy with a 25lb carry-on and 7lb briefcase? Do the math. So...who would you market to? Think about it...the best seat manifest an airline could look at would be a bunch of college marathoners flying across the country with a single carry-on apiece.
This is the kind of shit I think about...
I am so in awe of your brain. Could I borrow it the next time I have an audition and I need to be smart?
Travis
Posted by: Travis | June 26, 2008 at 09:47 AM
While you're on the subject - people will do all their eating and drinking in the airport, carrying that weight right onto the plane, without the airline getting a cut, and paying for disposal to boot.
Posted by: Doug Bergman | July 09, 2008 at 12:23 PM