Turns out that not only do airline customers hate baggage fees, but they seem to be avoiding airlines that charge them.
Turns out that not only do airline customers hate baggage fees, but they seem to be avoiding airlines that charge them.
I was surprised to read this evening that American Airlines has asked Kayak and SideStep to stop displaying their fares. (This follows news that you’ll have to pay JetBlue seven dollars if you want a pillow and blanket to use during your flights.)
This latest move by AA strikes me as utterly baffling. If you haven’t used Kayak, it’s a site that enables you to search many sites at once for airfares, including all of the airline sites, Orbitz, and others. The ticket price comparison feature is nice, but Kayak really excels because its interface is outstanding. So why is AA dropping out?
My guess is that they’re hoping to encourage other airlines to drop out as well, in the end killing price comparison sites like Kayak. Kayak is, among other things, an incredibly valuable tool for people who want to pay as low a fare as possible for a flight. Not only will Kayak show you the cheapest flights on a given set of dates, they also help you figure out when is the best time to buy tickets in order to get a good price.
THe airline pricing model is built around selling tickets to each customer at the highest price possible. They sell tickets cheaply to vacationers who are very price sensitive and buy tickets far in advance. They sell tickets at higher prices to business customers who tend to fly on shorter notice and have less flexibility when it comes to flight times. Sites like Kayak subvert that model, and it seems apparent to me that AA’s real goal is to kill them before they become more popular.
My guess is that AA reverses its policy before Kayak (and its competitors) disappear.
To me, the biggest effect of higher oil prices is the havoc they are wreaking on the airline industry. Andrew Leonard looks at state of things on his blog, but I think there’s a lot more analysis to be done. A friend of mine who spent many years working at American Airlines remarked last week that there is not a commercial aircraft in the air that was built for these fuel prices. When you look at the purchasing cycle (and the research and development cycle) for commercial aircraft, you have to wonder how long it’ll be before more economical planes will even be available, if ever?
Aviation Week is predicting carnage for the industry. Oil prices are raising costs for operators and higher ticket prices are reducing demand. If the airlines don’t plan well, they could be flying half-full planes around the country at the highest costs they’ve ever faced. Here are the raw numbers:
There is a consensus among analysts that the average oil price for 2008 will be $107 per barrel. If that becomes a reality, the airline industry will have to shoulder $40 billion in additional costs per year and end up with a $2.6-billion loss for the period. At the current $130-per-barrel price, airlines will post a deficit of almost $7 billion.
But that figure masks the real extent of the problem, says IATA’s chief economist, Brian Pearce, because most European and Asian airlines are still relatively well protected by their hedging portfolios. The true additional cost burden at $130 per barrel is $99 billion on an annual basis, or a 20% increase in total costs.
I think the full implications of skyrocketing air travel prices are hard to impossible to predict. What’s it mean for business travel? For choosing where you want to live? Will we soon be adjusting to a world where air travel is once again a luxury product?
Tyler Cowen responds to a reader request for tips on visiting developing countries. Great stuff. (See Chris Blattman’s adenda to his tips as well.)
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Fire the TSA?
I’ve been reading Bruce Schneier for more than a decade now, so very little of Joel Johnson’s piece, President Obama, It’s Time To Fire the TSA, is news to me. The more interesting question to me is, is there any reasonable path to changing how we think about security? Schneier hammers the TSA repeatedly for protecting against tactics that have been used previously rather than trying to think more systematically about the shape of future threats, but given human nature, it’s not surprising that we handle things that way.
The canonical example of security theater is the requirement that everyone remove their shoes before passing through security. We all know why that rule exists — Richard Reid tried to blow up an airplane with a bomb in his shoe on December 22, 2001 (yes, we’ve been removing our shoes at the airport for 8 years). There’s nothing special about secreting a small bomb in your shoe. As we learned this week, you can stuff a bomb into your underwear just as easily. But imagine the political casualties if someone were to blow up an airplane with a shoe bomb now. The opposition and the media would crucify everyone they could get their hands on for not protecting against a tactic we know that the terrorists use.
In fact, if a politician even tried to stop the shoe removal process, they would be attacked for not taking terrorism seriously. Many of us wish for more political courage from our politicians, but the incentives of every political system serve to diminish political courage and to cull out the truly courageous as quickly as possible. So I’m all for firing the TSA and restoring sanity to airport security, but I’m not optimistic that it’ll happen.