Speculation on the Economics of Airfare
As oil prices skyrocketed over the past several months we all heard airlines pleading poverty. Consumers were told that flight schedules would be cut and airfares would rise. When booking air travel people were charged for fuel costs, when checking in, passengers were charged fees for checking luggage. First fees were added to check a second bag, then many airlines started charging for a first checked bag. There are valid arguments on both sides of this issue. Many people feel that the carriers should simply roll the fee into the base price for a ticket so that you know how much the trip will cost upon purchase. I happen to understand that it would be a bad business 
decision to be the first airline to charge more for a certain route…potential customers would flock to the lower priced competitors. I also believe that because more weight requires more fuel it’s only fair that the people who two huge suitcases pay more than someone who travels light. Ever travel to Europe? Baggage fees are commonplace there. People travel with less, and restrictions on liquids, especially hygiene products, don’t seem to bother Europeans much.
Here’s some food for thought on the airline industry. I’m pretty sure they’re screwing us. The obvious thing, staring us right in the face, is that now, as fuel prices take a nose dive (unlikely to last..I know) we haven’t heard of any of the major carriers easing fuel surcharges, baggage fees, or any of the other fees that were instituted during the price run up on oil. Something else to consider: business groups in many destination locales often subsidize seats on flights. The point is that airlines aren’t going broke due to a lack of revenue, they lose money due to poor management tactics.
In the U.S. Southwest Airlines turns a profit. They do it without charging fuel surcharges, checked bag fees or selling snacks. They do it because their management is interested in turning a profit for the company and creating value for the stockholder. Same goes for Ryanair in Europe – though they do charge baggage fees, they are a no frills carrier and often sell tickets for little more than the taxes.
Fuel costs are a big buzzkill for us all, but somehow we make it. We change our priorities and manage our lives differently. We figure it out. The airlines could to if not for the greed of the management.
