Where The Travel Industry’s Going
Guest Blogger (Dan Vorlage)
There was an article a few months ago where a well-known journalist asked 4 or 5 airline marketing executives if they were considering charging a fee to use the lavatories on their planes. It’s ridiculous enough that the question was asked but it’s even more ridiculous that the executives humored the question. The travel industry’s changing quickly. Here are my opinions on what’s driving the changes and where things might end up.
1) Too Much Capacity
· Every year it seems there’s a new airline willing to spend millions to try to break into the U.S. market. When asked why people are still willing to invest in the industry, Gordon Bethune (the outspoken former CEO of Continental) said simply “there’s a sucker born every minute”. And capacity has further piled up as a result of the government’s involvement in this “deregulated” industry. Cheap air travel, air service into small towns and the jobs that come from excess capacity are simply too important to the economy to let traditional market forces work. Airlines go into bankruptcy more often and are allowed more time and flexibility in how they come out of bankruptcy than just about any other industry.
2) An Over-Bundled Product
· Now that the pressure for revenue generation has reached a boiling point, airlines are noticing that there are services they’ve been offering for free for years. From an airline’s perspective, it would be like somebody ordering a Big Mac, Fries and a Coke and only being charged the price for a Big Mac. Airlines now recognize that there are millions of customers that just want the cheapest ticket possible and could care less about earning frequent flyer miles or sitting in a middle seat if it meant they could save $50 on a flight. However, if earning miles, choosing your seat, being able to check bags or having a refundable ticket are important to you, the airlines are increasingly finding ways to charge you for those additional services.
The end result is that we’re all watching a broken industry desperately trying to squeak out a profit. Think about it. The airline industry has lost more money than it’s ever made. In the last 4 years alone the industry lost close to $10 billion. However, customers take it for granted that they typically pay far less for their flight than what it costs for the airline to fly them from point A to point B. So will airfares continue to go up? Absolutely, especially as the industry continues to take capacity out of the market. Are 1st bag fees and having to pay extra for a seat assignment here to stay? Absolutely. But, considering we can fly across the country in 4 hours for about the same price as it would cost to drive the same distance in 4 days, I think customers are still getting a pretty good deal.
