Article: Airline Products Are No Longer Just a Chair in t

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Hello everyone. Gary from A View From The Wing blog has a great post out today discussing the shifts in the airline industry products that may be worth your time to read. Below is a snip-it and the title links to the full article.

They Don’t All Look Alike: Airline Products Are No Longer Just a Chair in the Sky

Airline seats used to be thought of as interchangeable. You have a seat that gets you from A to B. In many cases you have to connect, through a hub, and most of them have similar degrees of efficiency. Airlines pretty much competed just based on price, and given how technologically advanced pricing is the price of a trip on most airlines is going to be about the same. Sometimes airfare will vary for a given flight but there’s usually a reason — either that flight is mostly sold out, or perhaps there’s competition with a low fare carrier… so the major airline matches the price only on their flight that’s running at about the same time as the competition’s, while charging more for flights at different times throughout the day.

That’s a terrible business to be in. Airlines are capital-intensive with huge fixed costs. Barriers to entry are low, with the exception of slot-controlled airports (the government won’t allow more flights) and airports where all the gates are locked up in long-term leases (but even then there’s a secondary market where new entrants can get access to those gates). And airlines face hugely variable costs (fuel, and hedging isn’t an obvious solution, United Airlines tried and lost hundreds of millions of dollars that way). Plus they’re heavily unionized and heavily regulated and heavily taxed.

There’s a reason behind the old joke about the quickest way to become a millionaire — start out with a billion dollars, then invest in an airline.

Three seemingly unrelated developments over the past six months lead me to think that the airlines are finally making progress to change all of that.

Frontier Airlines will begin instituting carryon baggage fees for customers booking the cheapest fares through third party websites.
American Airlines has filed new fares that include waived change fees, bonus miles, checked bags
RouteHappy – a new online booking engine – has launched which will help customers pick the best flights for them based on factors like better than average legroom, inflight powerports, and wifi.

Taken together these developments point to product differentiation being achieved in the industry in a way that hasn’t ever happened before. Most customers don’t realize it yet, there’ll be a real lag before the airlines achieve consumer awareness, but it’s no longer true that every airline seat is the same, no matter where you buy.