It’s been a while since we have posted about airline baggage fees, one of my favorite topics. As I have argued before (see here or here), baggage fees are interesting since they serve as a way to regulate passenger behavior and potentially lower airline costs. Fewer bags means less labor in loading them on and off planes or tracking down lost bags. It also potentially means less weight if passengers actually bring less stuff aboard. But how much is any of that worth? Are we talking about pennies or dollars or thousands of dollars?
The folks at FiveThirtyEight have tried to answer part of that question (Why Budget Airlines Could Soon Charge You to Use the Bathroom, Jun 30). More specifically, they look at the negative impact of adding extra weight to the average flight (or the gain to be had from shedding weight). Here is how they described their methodology.
Our analysis takes into account the distance of a flight, the weight carried onboard the aircraft, and the aircraft type itself. It then simulates every phase of the flight, from departure gate to arrival gate, in order to determine the fuel consumed at each moment along the flight path. To get an idea of how adding small amounts of weight can affect fuel burn on a typical flight, we analyzed a flight from Boston to Denver operated by a Boeing 737-700. Southwest Airlines operates this service three times per day.
According to our model, the total cost of fuel for operating this flight with 122 passengers (85 percent of the maximum seating-capacity) is about $7,900. Each marginal pound onboard the aircraft for this flight will result in a marginal fuel cost of a little less than 5 cents. So if every passenger remembered to go to the bathroom before boarding, shedding an average of 0.2 liters of urine, the airline would save $2.66 in fuel on this flight alone. Such tactics are not off limits. Ryanair famously contemplated charging customers to use the bathroom (in an effort to reduce the number of on-board bathrooms and pack on more seats). Company spokesman Stephen McNamara said in 2010, “By charging for the toilets we are hoping to change passenger behavior so that they use the bathroom before or after the flight.”
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Getting people on and off planes is a fascinating topic. Most people have a very visceral response to it if only because it is a business process that we are routinely exposed that often does not run well. Why it doesn’t run well can be blamed on the airline (since there is not the same degree of process standardization in boarding that one sees at, say, a supermarket checkout) or our fellow travelers (since those idiots so often don’t follow instructions). There have been some recent innovations such as boarding passengers in a random fashion or allowing those who do not need an overhead bin to board first. Now Wired reports that other process changes are coming (Airlines Still Trying to Make Passenger Boarding Less Annoying, Aug 28).
The most unusual — and deceptively simple — idea is simply opening the door at the rear of the plane in addition to the door at the front. Alaska Airlines is trying this at a few airports, including its home base in Seattle and Mineta San Jose International Airport in San Jose, California. The idea isn’t entirely new — many airlines, including Alaska, open the front and rear doors at those airports where there is no jetway, only a staircase leading to the tarmac.
“We’ve been doing the dual-door boarding at some of our Mexico destinations for a while,” says Alaska Airlines spokeswoman Bobbie Egan. But now the airline has a new tool to help facilitate using both doors at other airports. “Because of the solar-powered ramp, we’re testing the idea of dual-door boarding at airports where we didn’t have it before.”
Yes, a solar-powered ramp. Mounted on wheels, the ramp can be driven to the backdoor of the airplane, and passengers make two switch-back turns down the ramp to the ground, providing an alternative to stairs for easy suitcase rolling and wheelchair access.
Using the aft door to unload passengers can reduce the turnaround time by up to 10 minutes, according to Alaska. Egan says the airline will continue to evaluate the data and feedback collected, but for now it’s a pilot project there’s no word yet on whether the process will be expanded to other airports.
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Spirit Airlines has made some news this week by announcing some tweaks to their fee structure. Most notably they are increasing the fee for carrying on a bag (they are the only US airline that charges for carry ons unless you consider charging for earlier boarding a form of charging for a carry on). If you carry on a bag and don’t pay for that until you hit the gate, it will set you back a C-note (see, for example, Spirit Airlines to charge $100 for late carry-on bags, Marketplace, May 4). I wasn’t feeling compelled to comment on this until I read Saturday’s Heard on the Street column (One-Hundred-Buck Bag Shows the True Spirit of Air Travel, Wall Street Journal, May 5). It noted the following about Spirit’s $100 fee.
Rather than being a big money-spinner, though, the increased fee is more likely a form of deterrence. It will be an incentive for passengers to pay their fees ahead of time, says aviation consultant Bob Mann of R.W. Mann & Co. This reduces costly delays caused by bottlenecks at the gate.
This is basically the argument that Gady and I make (along with our colleague Achal) in our paper about baggage fees (although we focus on checked bag fees): If providing an ancillary service like checking a bag or providing space in an overhead bin imposes a cost, it is best to charge for it. The goal in charging for the ancillary service explicitly (over bundling it with the main service) is to reduce use of that service (relative to bundling). For more, see here and here.
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Posted in Airlines, tagged Airlines, baggage fees on February 9, 2012 |
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So the New York Times had an article on the lengths people will go to avoid baggage fees (Avoiding Baggage Fees, Feb 7). Tricks of the trade run from vacuum sealing bags to driving hours to get on a Southwest flight. Here’s what caught my eye, however:
In Congress, lawmakers in both houses have introduced legislation to force airlines to roll back some of the fees. Senator Mary Landrieu, Democrat of Louisiana, introduced a bill in November that detailed what services passengers were entitled to receive free, and mandated that airlines allow passengers to check the first bag without charge.
In December, Representative Larry Kissell, Democrat of North Carolina, followed suit by introducing a companion bill in the House. Both are confident they can get bipartisan support.
Senator Landrieu said she had no problem with airlines charging for nonessential services. “If you want to bring five bags or if you want beer or wine, you can pay extra,” she says. “The bill is not anti-airline, it’s really pro-consumer.”
So should fees for checking the first bag be eliminated? (more…)
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OK, so my headline is a little misleading. By “pay” I mean give you 500 bonus frequent flier miles and by “you” I mean elite members of their AAdvantage frequent flier program who happens to be traveling from Boston. Here is how they explain the offer:
Through November 22, 2011, American Airlines will offer AAdvantage® elite status members the opportunity to earn a minimum of 500 AAdvantage bonus miles for checking bags on flights departing Boston Logan International Airport (BOS).
Earning the bonus miles is easy – simply visit a BOS Self-Service Check-In machine on the day of your departure and follow the normal steps to check-in with bags. Check at least one bag under your own name to earn the bonus miles, which will automatically post to your AAdvantage account five business days after you have completed the travel associated with your itinerary. As a reminder, all AAdvantage elite status members are entitled to check two bags free of charge (within current size and weight limits) in addition to earning the bonus miles with this special offer.
There are, of course, a number of caveats (such as the bonus is only for your first bag) but they are, in effect, paying a select group of passengers an incentive to check bags. This strikes me as rather crazy; I can’t quite figure out what they hope to accomplish with this. (more…)
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A different sort of post today. This one is about a research paper that Gady and I recently finished with our colleague Achal Bassamboo. The paper is called “Would the Social Planner Let Bags Fly Free?” It deals with ancillary services — things like checking bags or printing boarding passes that service firms provide in conjunction with their main service (i.e., flying a person in the case of an airline). What is notable about this paper is that it is the first paper to follow directly from this blog. In essence, the paper compare the relative merits of two quotes that have appeared here in The Operations Room.
The first quote is from Michael O’Leary, the CEO of Ryanair and it appeared in something Gady wrote. (It should be clear from this why we refer to this paper as Fee to Pee.)
Like, paying for checked-in bags: It wasn’t about getting revenue. It was about persuading people to change their travel behavior—to travel with carry-on luggage only. But that’s enabled us to move to 100% Web check-in. So we now don’t need check-in desks. We don’t need check-in staff. Passengers love it because they’ll never again get stuck in a Ryanair check-in queue. That helps us significantly lower airport and handling costs.
Now we’re looking at charging for toilets on board—not because we want revenue from toilet fees. We’d happily give the money away to some incontinent charity. What it means is, if by charging for toilets on board, more people would use the toilets in the terminals before or after flights, I could take out maybe two of the three toilets on board, add six extra seats and reduce fares across the aircraft by another three or four percent.
The second quote appeared in a post I wrote about Spirit Airlines starting to charge for printing boarding passes at the airport (which Ryanair was already doing). It is from Ben Baldanza, Spirit’s CEO.
“We believe it is important to let customers decide what is of value to them,” said Ben Baldanza, Spirit’s chief executive. “Imagine if you went to a restaurant and all the meals came with dessert. That’s great if you like dessert but, if you don’t, you would prefer the option to pay less for the meal and not take the dessert.”
Note that these are fundamentally different rationales. Ryanair’s O’Leary is saying fees are shaping behavior to lower costs and those saving can be shared with customers. Spirit’s Baldanza is basically talking about segmentation. He’s creating a pricing menu that may give some customers a break but is mostly going to extract extra cash from customers who value or need ancillary services.
So do either of these explanations hold water?
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As long-time readers of this blog know, baggage fees are one of my favorite topics. Now from England we have an innovative way of beating the system.
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