Wednesday, October 10, 2012

Come fly with me--since the cost has never been much lower

Mark Perry at the Carpe Diem blog points to a couple of interesting data sets showing the steady downward progression in the cost of flying. It is a great post with what will be for some, but not us at MM, very surprising facts. I like the conclusion:
Overall, consumers have reaped significant benefits from the deregulation of airlines in 1979, and have saved billions of dollars in lower fares.  Like any industry, the airline industry is evolving over time, and consumers have to adjust to the changes.
Read the whole thing.

That last line and my recent air travel got me thinking a little about where I see the evolution of the airline industry headed. FWIW, my forecast is for reduced or eliminated class distinctions within individual flights. I believe service levels will be separated by airline generally and occasionally by airplane. Watching the odd, halfhearted auction that took place before every leg of my recent American Airlines flight brought me to this thought. People vie for upgrades in ways that more resemble prisoners asking for special privileges from the warden rather than paying customers engaging in free market transactions.

I love Southwest Airlines, but I realize their approach may not appeal to everyone. I just can't believe the current model still in use by so many other airlines appeals to anyone. That's why I see a role for an airline specializing only in first/business class service. And also I see airlines that have entire planes or routes that offer one level of service with other routes/planes offering another level completely. There will be more a la carte purchasing of goods and services in flight. American among others is doing some of this by selling food items and pricing preferred seats at a premium. Expect a lot more of this but perhaps in a more appealing way. I think the winning airlines will be those who are more transparent and trusted in their ticket pricing. Today's approach is filled with penalties; tomorrow's will be much more about amenities.

While this disrupts the classic model of price discrimination in airlines, we have already seen those models challenged and changed in movie theaters, et al. Pricing is more uniform and theater quality much higher for me today than it was a decade ago. There are many routes to profitable air travel.

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