Airline Follies


Just as I thought I’d seen everything, along comes Spirit Airlines suing the government for the right to engage in bait-and-switch advertising. You probably saw the story this week.Spirit has taken the idea of unbundling-that is, unbundling everything from the seat except the upholstery (and maybe even that)– and charging extra for it to absolutely artistic levels.Now Spirit is steamed that the government is requiring that its advertised fares include not just the fare itself, but also the taxes and relevant fees.And what fees! By this fall, Spirit will charge $30 for a carry-on bag, $28 for a checked bag, between $1 and $50 for a reserved seat, up to $15 for drinks and snacks, $12 to $199 for an extra-wide seat and, my favorite, an unintended consequences of DOT regulations fee of $2, which everyone pays each way.These fees are almost comically absurd, but they’re also American capitalism at its best. The cheapest possible prices and plenty of choices so that the customer can tailor his or her airline experience from absolutely horrid to sort of tolerable. Spirit is suing on the grounds that its first amendment rights are being trampled. Good luck with that one. It will be an interesting head butt between the commercial code and the Constitution.I flew Spirit once, but wouldn’t again. The service was adequate, but they have so many fees now that I’d be afraid of more being added while I drove to the airport.
Higher Fares
And speaking of fares, you may have noticed they’re up–as much as 25 percent. There are two reasons for this. One is higher fuel prices and the other is reduced capacity–the airlines have cut back on flight frequency and, in some cases, switched to smaller airplanes on some routes. United, for instance, has chopped up to 16 percent of its flights; Southwest about 6 percent.Supply and demand does the rest, so fares rise. While I don’t like paying the higher fares, I’d rather pay and have airlines run as profitable businesses than be niggled to death by ancillary fees. So I’m willing to suck it up and just pay.The downside is airplanes filled to the gills with passengers as load factors sustain above 80 percent. In the name of efficiency, that’s the way it goes. Another downside, unfortunately, is less flexibility in scheduling and a much higher probability of the airline re-routing or re-scheduling you whether you like it or not. Supply and demand again. I suspect the airlines will have to add back a little capacity once the curve reaches bottom. We’ll see.
Delta Makes Its Own Gas
I’d like have lunch with the MBA who came up with this idea: Delta bought an oil refinery near Philadelphia in order to makes its own jet fuel. ConocoPhillips unloaded the thing for a fire sale price.Now I’m no expert on oil refining but I have the phone numbers of people who are. If you fancied yourself wanting to find a fortune in the oil business, the last aspect you’d want to get into is refining. All the money is on the upstream side and refiners, which are typically structured as independent business units, often lose money. It’s just a tough, thankless business that requires gobs of capital for little, if any, return. And it’s not like Delta can convert all of the barrels of oil it will have to buy into Jet A. Refining doesn’t work that way. You have to make a range of products or get someone else to.It makes me wonder if Delta’s board was awake when this proposal floated by. Maybe the losses will sweeten their tax position. Only in the airline business could you seek more losses to make money. I give it five years before they’ll be trying to get out of the refinery business in a hurry. Carry-on bag fees, anyone?
Virgin’s New Cell Service
Meanwhile, Virgin Atlantic is introducing a new service that lifts the ban on in-cabin use of cellphones. Beginning this year on its London-New York routes, Virgin will offer a service which appears to provide a local cell network inside the cabin through a satellite link. It will be available to six users at a time and, evidently, only in business class. (Imagine the fights over divvying up that limited service to the road warriors in the biz section.)This could end up being an interesting sociological experiment over the wilds of the North Atlantic. Even though passengers will be asked to keep usage to a minimum, we all know that 3.6 percent of the population are loud, obnoxious cellphone users or obsessive texters. Personally, on a long international flight, I’m perfectly happy having the cellphone silent and pray that whoever is in the seat next to me feels the same.