Re-run date: 6/15/2015
One of my daughters got married this weekend, so neither my thoughts nor my schedule had anything to do with writing a new column. Instead, here’s a re-run about yet another example of market failure. Unsurprisingly, the air travel industry is involved.
I enjoyed re-reading it. Maybe you will too. – Bob
* * *
What makes me mad isn’t that the airlines want to shrink our carry-on luggage. It’s that they think we’re complete idiots.
In case you haven’t run across this little firestorm, the International Air Transport Association (IATA) has announced a new standard. Conforming luggage will be about 20% smaller than what you’re used to carrying on. The IATA’s spokespeople say, “… it will lead to an improved passenger experience.”
Not content to insult our intelligence with that little gem, the IATA went on to say, “The Cabin OK initiative does not require passengers to buy new baggage. Cabin OK is not a revenue generating scheme for the airlines.”
Okay, let’s get this straight. It won’t require us to buy new luggage, because … we can shrink the luggage we own with a hacksaw and duct tape to make it fit?
And if passengers can’t pack as much into their carry-on luggage, none will have to check larger bags … for a fee … to bring enough clothing and shoes for trips our old carry-on luggage was big enough to handle?
I’m surprised they aren’t calling it “best practice.”
Passenger demand for overhead space has increased. The airline industry’s response is to reduce the supply. If you were running a business, would you reduce the amount of something your customers were demanding more of?
This is a clear case of market failure. Among the causes of market failure, in addition to monopolies, tragedies of the commons, and the dollar auction, we can add the failure to think like customers, I guess, or maybe simple denial of the obvious — characteristics with which the airlines long-ago proved they are amply supplied.
For example: With approximately one exception, air carriers argue they have to change ticket prices every 37 milliseconds because the laws of economics compel them to do so.
That this is insane was pointed out quite a long time ago by C Alan H. Hess in his brilliant “If Airlines Sold Paint” (if you haven’t read this, stop now and click the link — you’re in for a treat). That it’s completely wrong is evidenced by which carrier is the most profitable in the industry — Southwest, which doesn’t do this.
And now, not content with pricing that’s merely insane, some carriers now offer multiple pricing tiers, based on position in the plane and whether they provide enough legroom to avoid the need for amputation.
To be fair, position in the plane and amount of legroom are attributes fliers value. But there’s an attribute we all value more: Not being crammed into the furschlugginer center seat.
Do you know of any carriers offering a center seat discount? Me neither. And if any carrier did figure this out, you can bet they’d offer aisle-and-window-seat premium pricing instead … exact same thing, only most business travelers would not be allowed to book a seat labeled “premium.”
Talk to any experienced traveler about their preference for not checking luggage and you’ll find price has little to do with the choice. Most of us are frequent fliers on at least one airline, but still carry our luggage on board, even when the first bag is free.
Why? We both know the answer. We carry our luggage on board to make sure it (1) arrives at our destination; (2) undamaged; and (3) with its contents undamaged, too.
Which leads to the KJR solution: Charge ten bucks per checked bag — enough to make money; not enough for business travelers to care — and do what Domino’s Pizza does: Guarantee fast delivery, with the goods in good condition, or your next flight is free.
If I was confident my bag would be waiting for me in baggage claim when I got there, in the same condition it was when I handed it over, I might even start checking my computer bag, too.
What does this have to do with running IT? Not much. The IATA just ticked me right off and KJR was waiting here for me to write about it.
But there is this, which you can take to the bank: If IT wants its users to behave in a certain way, the starting point isn’t to set and enforce standards.
It’s to look at the world through their eyes, not IT’s, setting standards and writing policies that are more attractive than the alternatives.
Most of the time, in most situations, enforcement is the lazy alternative to empathy.
Bob,
Mazel tov on your daughter’s wedding.
Since passengers want in-cabin luggage and not checked luggage, the airlines should flip the pricing. Charge for space in overhead bins (in a way that lets business travelers put it on their expense accounts) and let checked bags fly free.
LOVED the 1998 piece If Airlines Sold Paint – as true now as then, for airlines, and for IT.
I was disappointed in the paint article, especially when it got to the customer saying, “But I can see hundreds of cans of paint on your shelves right now!” A true comparison to an airline would be a customer trying to buy a seat on an immediate flight, which typically if there are any seats at all, they’re be only a few on a few flights. So the paint customer would be looking at just a handful of cans, all the wrong color and the wrong type.
Even if the customer could “see” all the future seats/cans on future flights, he’d “see” that many of them are already marked reserved for customers that have already ordered/purchased them.
A better comparison would be a paint store that decided that instead of sinking a bunch of money into the cost of a large building housing all this paint, had a small storefront (or website) where customers ordered the color, type, and amount. Small quantities of highly specialized paint delivered overnight would cost a lot more per can than more common color/types delivered at some future date that are already scheduled on a routine basis with other customer orders.
Yes, there are still all sorts of oddities in airline pricing due to all sorts of things, including: times of higher demand vs. lower; the very high cost of trying to exactly match “supply” (the number of airplanes an airline owns, and the number of flights it schedules at various airports) to that varying demand; the high cost of moving aircraft and personnel to the various airports they’re needed, if customer demand doesn’t already send them there at the right time in the right quantities; the costs of negotiating rights and schedules at airports; and probably various Federal regulations regarding how to deal with unused tickets and the like.
Airlines have very high “fixed” costs – it takes a long time or a lot of expense to respond to fluctuating demand. Since demand is in the customers’ hands, and costs are only adjustable in the long term, airlines put a lot of effort into pricing. Their byzantine pricing schemes are based in solid economics, and even more so – because they can.
“…setting standards and writing policies that are more attractive than the alternatives.” I love that. I have been saying for years that the best processes are ones that people actually WANT to follow because they’re easier and more reliable than doing it another way.
Well said. I’m so sick of hearing the conservative myth that a free, unregulated market will result in the best possible outcome, no matter what the dynamics of the transaction might be. That can be true, and when it works it may be preferable, but when non-regulatory barriers to entry are high, competition is stifled, and the consumer is almost always on the losing end.
You start the column by ridiculing the policy of reducing the amount of space a passenger can use in the overhead compartment, but you never provide an alternate solution to the dilemma of high demand for limited supply. You suggest they should increase supply, but the only way I can see to do that is to make the overhead bins larger.
Of course, then you’d complain about the impossibly reduced headroom.
Overhead bin space is a commons problem, and the airline is in charge of regulating it, since it’s their airplane. They’ve crammed more seats in, and more bodies into those seats, so yes, the demand for inside space has gone up.
The only way to fix that by increasing supply is to go back to the older-style seating, with more legroom, and/or more flights with empty seats.
Of course, that would dramatically increase pricing, and then you’d complain about that.
Coincidentally, I recently read a NYT article that said that the average cost of a ticket, adjusted for inflation, has declined 50% over the past 35 years, including add-on fees.
We’re paying less, so we’re getting less, not surprisingly. You want more, you have to pay more (for business class, first class, what-have-you, though possibly you have to pay more than 50% extra – I can’t figure out pricing either).
The airline industry is the perfect example of how the “free market” is always rigged through monopolies or, in this case, collusion between suppliers, to the benefit of the people with supply.
Business fliers put up with the high prices, shoddy service, lost luggage, baggage handling thieves colluding with TSA personnel (don’t get me started) because there is NO alternative to any of it.
Casual civilian flyers put up with the same issues because they only get to understand what a horrid experience it is once or twice a year, and consumer memory is very, very short.
And by the way, you might have updated the article to reveal that the airline industry as a group has asked this very friendly Congress to pass legislation saying that no matter what happens at airports, or boarding areas, or on the plane, no matter how badly or even illegally airline personnel behave, or break the law, they are not responsible and cannot be sued for anything, ever. And further, to make it a federal offense to video anyone who works for the airline doing anything like that, with added penalties for posting such a video online.
I have increased the ‘drive radius’ (the range to which I will drive, not fly) from 125 miles to 600, will only fly domestically with Southwest (the best of a horrible bunch), and will only fly Internationally on non-U.S. airlines.
The problem is that most flights continue to be mostly booked, and the airlines see no reason to change their practices, and no reason not to increase fares and nickel and dime you to death for every little thing. The latest pricing indignity is their insistence that buying a domestic ticket does not actually get you a seat – you must log in and select one, at which point it becomes obvious that the only seats available for selection cost extra. This is true no matter how early you book. If you refuse to be extorted and don’t select a seat but wait until you get to the airport to be assigned one, your chances of being bumped off a flight go up tremendously.