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Old 04-05-2006, 04:22 PM
  #9  
ChrisH
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Joined APC: Nov 2005
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Originally Posted by ryane946
I wrote a pretty long and good response to this, and unforunately my session timed out and I could not recover the response. Anyway, this response will be brief but I will try and make my point.

1. Airlines have tried to raise fares by $5 to $10 MANY times in the past 4 years. The problem is all the other major airlines have to match the increases, otherwise your product is more expensive than everyone elses.
Think about it. If you raise prices by $5 on a $300 ticket, and another airline does not, and JUST ONE passenger flys on the cheaper airline, you lost your $5 gain from 60 people! It just doesn't work unless ALL airlines raise their prices. Usually one airline raises prices, and the other carriers either follow their lead, or they do not raise fares. All it takes is ONE carrier to not raise their fares, and then everyone else is forced to rescind their increases. This is the smartest way, but you need full compliance from other carriers to raise fares.
Southwest would almost never follow suit. Fortunately, their fuel hedges are running out, and they actually accepted a $10 increase earlier this year. Using this strategy, airfares are up 10% from Feb 05 to Feb 06. However they are still 16% below their pre-9/11 levels. As Southwest's fuel hedges run out, I think you will see a return to pre-9/11 airfare levels.

2. I completely disagree with your idea on soda. Soda is cheap. Let me say that again. SODA IS CHEAP!!! Fountain soda costs like $.02 cents for an 8oz glass. You would not save that much money by not serving sodas on short flights. Neither would you make that much. American Eagle tried charging $1 for sodas, and they immediately stopped when they heard all the customer outrage. This will anger more customers, hardly save you anything, and generate almost no revenue.

3. I also disagree about the bags for a similar reason. You will anger too many people and not make that much additional revenue. Currently, airlines charge money for extra bags, and they charge for bags that are extremely heavy. This makes sense as this will increase their fuel costs. But I see no reason to charge for bags.


Adding small fees and milking EVERY customer for a few extra bucks will not solve the problems. We need to get creative. Remember when I told you how cheap fountain sodas are. Canned sodas are probably 3 times more expensive. What if beverage carts had a fountain soda machine on them. This would cut your soda bill in 1/3. Lets say an airlines soda bill is $15 million a year. They could cut that to $5 million if they use dirt cheap fountain soda. What does it matter? Airlines just open the cans and pour them in plastic cups anyways. Ideas like this is what is going to save an airline money.

Furthermore, I do not think any airline will be successful with charging new fees for old products (soda, checking bags, etc...). Where I think the key lies is new services. Wireless internet on airplanes? Things like that can increase revenue.
In my first post I did state that for this to work properly, all of the airlines would have to do this, not just one. If just one, or just a few did it, it wouldn't work. Passengers would probably not notice the $10 increase if it were done by all airlines, but if they begin noticing several, or even one that is $10 cheaper, that airline will get the business, and not the ones that increased their fare.

Soda is cheap, but .02 cents can add up. Olives are cheap, yet American Airlines saved $30,000 per year by keeping just one off of each salad. If you can cut costs by not serving sodas on a 45 minute flight, rather than cut pay, I go for the cut in soda.

I do think it may cause somewhat of a hassle to charge $1 for checked baggage, at first. At first there will be passengers that will be angry about it, and passengers that will claim not to have $1 on them, or who knows what else. But if all of the airlines did this, and began making it part of their policy, in time passengers would catch on. An easier way to do this is to ask when passengers are purchasing tickets online, or by phone if they will be checking baggage. If they answer yes, they get an additional $1 charge to their fare. If they say no, yet show up to the airport with baggage needing to be checked, they will be charged the $1 at the airport. Like SouthWest who charges the $1 fee for showing up and making changes to your reservation. Sure it is normally a free service, but $1 isn't exactly much for a passenger to pay, to potentially make the airline millions per year.
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