Tuesday, April 1, 2008

Nickel and Diming Penny Pinching Airline Travelers

Delta Airlines recently raised prices on checking extra bags, booking flights on the phone, and ticket prices for cats, in this news story discusses the fee hike. Why should raising prices on services that used to be free or cheaper be better at customer retention then raising ticket prices?

It is probably a function of how customers search for plane flights. Basically people keep going for the cheapest ticket prices, with little attention to extra charges. I think the same thing goes for service. Most airline passengers are not willing to pay enough to make it worth their while to get better airline service, it might also be that extra cost are too high. Delays could likely be reduced if more spare planes and flight crews served as backup, or if airlines would put you on other airlines if your flight was delayed more than a few hours.

So the result is that airlines are providing less service for the same amount of money (as highlighted in this article). At least Southwest still gives you peanuts.

If you are one of the budget minded travelers, you might want to checkout my friend's blog Nobudgettravel where you can learn to travel Europe and the world on less than a shoe string.

Bookmark and Share


Gregorus said...

It seems like this step would attract more customers than raising prices, because of the way most consumers search for airplane tickets, as you say. But it seems like it would negatively affect customer *retention*.

I know that once I find an airline I trust to provide good service and not charge exorbitant fees, I'll stick with them, even if their prices are $50-100 higher. Midwest Airlines is the example I use from my daily life. That's what customer retention is about. Given that customers who get charged these fees once might get scared off from coming back, I think this may backfire on them.

What do you think about airport peak-hours congestion pricing?

Less Than a said...

Here's another take on airline economics.