Infrequent Flyer 1/14: Airlines are Businesses… Trying to Make Money
October 28th, 2011 by Mike

What most Americans don’t realize is that next to your power company, airlines are some of the most heavily regulated and taxed companies in the nation. Between the FAA, TSA, NTSB, and God knows how many other federal agencies, airlines deal with mountains of regulations and paperwork every day. And the funny thing is that they sometimes make money. The aviation business is incredibly cyclical. They’ll make money for a few years and then bleed cash for a few years. When they make money, they make it hand over fist. And when they lose money, the face extinction right in the face.

If you’re watching ABC’s Pan Am, they’re trying to take us back to the days when travel was glamorous and less… well… sucky. There used to be a day when Tourist Class seats (what we today call Economy) used to have more legroom than today’s first class seats. And the inflight crew used to cook meals right on the aircraft. Those days are long gone.

The Boeing 747 was designed so that airlines could put a piano and lounge on the upper deck of the aircraft. Despite Boeing’s good intentions, airlines just tried to cram as many seats as possible into the space they have.

When you complain about how shitty air travel is, I have to ask you to get over it. Those days are long gone. Airlines are a business, trying to make money. They make money by moving people from point A to point B. It used to be a great score to get an exit row seat. Guess what. You’re going to pay for that little luxury now. The same thing is true for getting an aisle seat near the front of the plane. And checking your bag? You’re probably going to pay for that, too.

Airlines are trying to make money. It’s what all good businesses do. They’ve had to change their business models over the year, and their customers don’t necessarily like that. If you don’t like it, you have other options, such as walking, driving, or even swimming. In the long run, air travel is still a pretty good deal.

What a lot of people don’t realize is that you pay a great deal of taxes on your airline tickets. My friend Drew would argue that you don’t pay enough taxes. Airlines and their customers are large consumers of government services. Most airports are run and maintained by some local government agency. The FAA maintains the airspace, air traffic control, and such. And the TSA gives us the perception that we’re safer while flying.

Not all airlines survive forever. Pan Am, National Airlines, USAir, and TWA are all chapters in aviation history. They all had great runs but are now history. And for the record, US Airways was days away from bankruptcy when they were bought by America West, who chose to keep the US Airways name.

One of these days, I’ll go on my rant about TWA being barely able to make their payroll when they decided to buy a new aircraft every ten days in order to drive down their maintenance costs.

Still, it’s a business. And it’s a really screwed up business model. What other industry charges their best customers more money than their occasional customers? If you have an answer, please let me know because I can’t figure that one out.

2 Responses  
  • Bill Cattey writes:
    October 28th, 201111:16 amat

    What you say is true. However, I would suggest considering two other ideas:

    1. Is it possible to have airline workflows and resources tailored to make the best of a challenging situation? I would suggest there are many opportunities to make air travel more pleasant at no additional cost. Examples: optimize boarding by boarding window seatted passengers before aisle seat ones. Apparently the research shows this makes boarding much faster and results in less aisle congestion. How about a DIS-incentive to clog the aisles with all your travel luggage into that overstuffed carry-on you stuff into an overhead bin several rows away from your seat because your bin is already full? How about timely and accurate communication of various flight delays, and well tested and optimized contingency plans for the inevitable problems?

    2. Rail travel could be vastly superior if it was funded on a more near equal footing with air travel. At the present time, taxes pay for significant airline infrastructure, but the political rhetoric is that it is rail travel that needs to be weaned off federal subsidy. Airports, air traffic control, and the interstate highway system are not subsidy, but train tracks to rural, unpopular, or unprofitable destinations is? I believe they both are, and that’s fine.

    The optimal solution will be when a one hour flight between Boston and Philadelphia takes LESS time, not more time than the six hour train ride between those same destinations. Then you have real competition, and the profit model comes from customers embracing the service, rather than profits squeezed from service cut-backs and “yield management”.

  • Drew writes:
    October 28th, 20112:58 pmat

    I’m the “Drew” mentioned. I only feel that we don’t pay enough taxes on the tickets because the taxes that we do pay do not cover the costs. Now, I’m no fan of the TSA, but if the TSA budget is $X billion dollars, the taxes collected for security should be $X billion dollars plus 10% to allow for growth and improvements.

    If it costs the county $X million a year to run an airport, then the tax/rent should be equal to ((Airport running costs)/ arrivals + departures). This would have the additional benefit of making the short hops less cost effective than long ones.

    I am all for major funding of Amtrak, as Mike already knows. To make the claim that Amtrak “should just run like a business” ignores the fact that 95% of the passenger rail infrastructure has been ripped out in this country. The airlines didn’t get their start by having to fully fund every airport they wanted to land at, and we shouldn’t expect Amtrak to be able to fully fund every new line they want to run.

    As for airlines cramming more people into economy…. I’m 5’10” 165lbs. There is no excuse at all for a seat on a 737 or A340 to not fit me or my legs comfortably. Because of these awful seat conditions, I’ve been using Amtrak more and more and just budgeting it into my schedule. I don’t live on the NEC like Mr. Mike does. All of my trains (both of them) are slow speed.

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