Airlines Unbundle, and a Reader Asks: 'Is This Good or Bad?'

Posted by: Justin Bachman on September 09

A Traveler’s Check reader, Lauren, posed an interesting question after reading the summary I posted Tuesday on the enormous leap in airlines’ ancillary revenues. “Is this good or bad?” she asks. I sent Lauren a short reply, noting that it depends on one’s perspective: Fantastic if you’re receiving these funds, perhaps not so fun if you’re on the paying side.

But on further thought, it’s probably worth parsing the nuances a bit further. One primary attribute of the new fees airlines have unleashed is that they are aimed at clarifying air travel’s costs and value: Pay for exactly what you want, save on what you don’t. I don’t drink the juice or soda that is still free on many flights, but there are times I’ll fork over $5 or $6 for wine, for example. Or perhaps I despise the thought of wedging my girth into the loathed “middle seat” on a cross-country flight: Some airlines now happily take money to prevent that by allowing one to select aisle or window.

The report is from IdeaWorks, a consulting and research firm run by Jay Sorensen, a former marketing director at Midwest Airlines. (One of IdeaWorks’ main services is helping companies boost revenues, so many of the airlines’ a la carte experiments are lauded.) In his introduction, Sorensen quotes Gordon Gekko, the fictional Wall Street financier played by Michael Douglas in the 1987 Oliver Stone movie Wall Street. (Douglas also won Best Actor for his performance.) Here’s Jay on how Gekko had it right about business progress:

The movie revolves around his 'greed is good' speech. This rant includes nuggets of wisdom such as ‘greed clarifies, cuts through, and captures the essence of the evolutionary spirit.’ He uses words here that are central to our ancillary revenue movement: clarifies and evolutionary. These words explain the magic of how we are serving consumers. A la carte pricing clarifies the value of services for the consumer. This allows them to pick and choose services and features based upon the desire to maximize convenience or minimize price. The evolutionary part is represented by carriers that choose this path and those that don’t. U.S. carriers faced a moment of truth during 2008 when they decided between baggage fees or financial peril. The Darwin-inspired concept of evolve or die will likely be faced by more and more airlines during 2009. Ancillary revenue is a crucial part of the evolutionary process. Ignore it at your own risk.

A bracing dose of capitalism, to be sure. But the essential point is correct, I think. Who really wants to pay for a bunch of stuff you don’t care about it? There are exceptions, of course: If an airline cabin is set at approximately the same temperature as a meatpacking plant, charging for a blanket becomes unreasonable. The tricky bit is measuring value against cost: What if the $10 pita wrap or salad is no better – or even worse – than the free mystery meat sandwich from the days of old? What if I pay $20 to check a suitcase and it doesn’t even get loaded onto the same flight I’m on? (Yes, that once happened to me.) These issues may be a matter of plain-Jane customer service, but if you look at any of the rankings from the glossy travel mags or international travel sellers, you don’t find a lot of the large American airlines faring well against the Asians and Europeans. Customer service is not the strong suit at many U.S. outfits. These carriers struggle financially, and I’d be willing to bet many (most?) view unbundling as strictly a revenue strategy and not a call-to-arms to fix their deficiencies. Sorensen tells airlines in his report, “A la carte pricing should support your brand, not change it.” Maybe it should change some of them, for the better.

The plethora of new airline fees definitely run the gamut from inspired to infuriating. As airlines tweak them, let us hope they keep a firm focus on those which truly clarify the travel experience and not merely aggravate it.