9/23/2007

There’s No Such Thing as a Free Pretzel

Airlines have recently started to charge for the amenities that they use to offer their passengers for free. These amenities include snacks, drinks, pillows, etc. The company has found that the typical airline traveler would rather have a less expensive ticket price than a twenty cent bag of crackers. There are some airlines though, Continental, that have not followed this industry trend. Therefore, many people think that with flying with a company like Continental that they are getting not only cheap air travel but also a free snack. Is that snack really free though? Most of the airlines that are still offering these complimentary snacks are not making as direct of flights as the companies that are eliminating the snacks. Thus, an airline traveler spends a great deal more time traveling for that twenty cent bag of crackers. Even though people are not paying for the crackers with their ticket prices, they are paying for them with their time. For me, I say keep your crackers, just get me to my destination faster.

7 comments:

Dr. Tufte said...

I'm tempted to take off for some kludgy phrasing, but I'll let it slide.

Your position seems plausible to me.

It does point out the problem with transportation as a business though: demand is inelastic.

People just want to get there. Cheaply. Putting flights to Fargo on sale is just not going to increase revenue. So, as transportation firms lower prices, they become less successful.

Think about it: can you name any major transportation industry in history which hasn't both improved efficiency and gone more or less bankrupt?

Hailey said...

Many people would rather have the cheapest airplane ticket regardless of the conditions and amenities; however, I believe that there is also a market for the first class ticket and all the extras that come along with it. Right now in my life I would rather have cheep and dependable rather than expensive and luxurious, but perhaps at a different time in our lives when money is not such an issue, we will be glad that not all airlines offer a cheap ticket that just wants you to get there. There needs to remain a small amount of airlines that offer the luxury flight that certain classes of people expect and are willing to pay for.

Logan said...

The market will dictate how much people are willing to pay for flights, pretzels, or anything else. I agree with the previous comment that there will be niches in the market. Some will offer cheap flights. Some will offer direct flights. Some will offer snacks, and some may even cater the event...it all boils down to how much you will pay.

It has been fun to watch JetBlue take on the big names in the airline industry for this very reason. They offer service like no other airline does, and are obsessed with customer feedback and improving the commercial flight experience. This will cause other airlines to find niche markets or improve their services. Either way, society as a whole is better off as a result of market competition.

Dr. Tufte said...

-1 on Hailey for a spelling error.

These 2 comments are sensible.

Even so, high quality transportation has never been a product that is profitable. So, I'm not convinced.

Timothy said...

My wife just flew to Oregon over the weekend. Looking at her bill is like opening my cell phone bill and reading all the taxes and charges that are accessed. There is the airfare, federal taxes, segment fees, PFC (whatever that is), 911 security fees, a seat selection fee, a convenience fee, and Boarding pass fee. I'm sure if they could have fit it on an 8 X 11 sheet of paper they would have charged for the pretzels. I think the airlines are really stretching to become profitable at any cost because the whole low price airfare thing is not working for them. Also, the demand for transportation via airlines is definetely inelastic because to get to a destination as far a Oregon without driving a very long time, you have to fly. Because of the inelastic nature of the air travel, they can charge for nearly whatever they want to.

Dr. Tufte said...

Timothy - you're economics is weak here.

Elasticity can change when we change the definition of the good.

If we define the good as "air travel" then it is probably inelastic because driving isn't always a substitute.

But, from the perspective of an individual airline, demand is likely to be elastic because there are many substitutes for "fly Delta".

Belba said...

According to an article from Knol, Australia has a substitute for air travel called High Speed Rail (HSR). HSR claims to be a substitute in that it is cheaper, cleaner, and faster. It’s cheaper because it is ground transportation and faster because of convenience. When traveling on an airplane, passengers have to plan a lot of time between take-off and landing periods.
HSRs are also friendlier when it comes to placement. They can be placed in several locations throughout one city, when an airport however can’t. Another positive factor about HSRs is that it is less sensitive to weather, allowing trains to travel regardless of conditions.
High Speed Rails may become more and more popular in the air travel substitution area in the future.