3/12/2007

Airline Food

If you have flown on a commercial airline recently, you may have noticed that there are no free airline meals on most airlines. The Capital Freedom Blog discusses this point and concludes that airlines must have found that passengers are very price sensitive about the cost of their seats – much more so than about the amenities on flights. Many airlines are charging $1 to $5 for snacks and meals aboard flights. Personally, I think this is a great change. Even when airline meals were free, I almost always preferred not to eat them. Now, I know that I am not paying for an amenity that I am not consuming. The article also cites Continental Airlines as being one of the last holdouts to offer meal service on domestic flights. Their research (very limited) indicates that while there may be a slight cost difference between airlines with and without meal service, the flight options (timing and number of connections) are still the #2 factor in deciding between airlines, with price being the #1 factor. For me, that is about right, although #1 and #2 are pretty close. I suspect when it really comes down to it, most consumers care very little about meal service, and the airlines were very wise to cut it as a cost-cutting measure. This will allow them to build their business with very price-sensitive consumers.

5 comments:

Eric said...

I agree that Airlines have made a step in the right direction when it comes to making customers pay for food. But from what I have seen some airlines have gone too far. For example when I flew to Maui over Christmas break American West Airlines ran out of food, snacks, and even ice!!! Mind you the flight was over six hours long and the people that did get food paid for it. This inadequate stocking of amenities was not limited to my flight alone. My parents on separate flights and my sister’s family all encountered similar out stockings on different airlines. While I agree making customers pay for a meal is a good idea, not stocking sufficient amenities is a very poor way to treat customers.

Jada said...

I agree completely with your article in the fact that I bellieve consumers are more concerned with the price of the actual airline ticket and not so much with the amenities that may be offered in-flight. However, there is an airline in Europe that is drastically reducing its ticket prices believing that they will make up the cost in charging passengers for each amentity used while in-flight. I dont' have an article to refer to as this was a discussion in a business class, but as a frequent flyer myself I would buy a cheaper ticket and then NOT spend more on amenities. I wonder what this airline's bottom fiscal line will be after a year of this new marketing scheme.

Dr. Tufte said...

-1 on Eric for a capitalization error.

This is not a problem that is confined to airlines. All transportation businesses have demand that gets more elastic through time, leading to revenue problems.

Jada is referring to RyanAir. Their intention is to get the price of tickets down to zero (they are giving up on that end of the revenue problem) and to make it up by offering services and advertising to a captive audience for items with inelastic demand.

Trinity said...

Dr. Tufte's point with RyanAir is a very good one. While it may be unwise to lower tickets to $0, cutting the food service will cut costs, while offering food and other products as revenue engines is very wise.

Dr. Tufte said...

Ryanair seems to have backed off of this as well.