When an airline does not charge enough for their tickets to cover the cost of doing business, they are essentially saying to their shareholders, you will subsidize the traveler out of your pocket so we can maintain market share. This is not that bad in the short term, but in the long term it is a terrible way to run a business.
And that is why the airlines are in the plight they are in now. If the airlines are smart, they will add another surcharge in the next month or two and make sure they are profitable and viable, as opposed to being stuck in a death spiral for market share.
Tuesday, March 14, 2006
Rising Ticket Costs
The fees they are a-rising! Is anyone surprised? How long can this insanity continue?
Southwest has decided to add a surcharge to their ticket price to cover the increased costs of fuel (or in recognition that their fuel hedging is nearly gone). This fuel surcharge is based on the mileage of the flight. Makes sense -- longer flight, more fuel. However, it is also based upon when you buy your ticket. I'm scratching my head here trying to think what that has to do with fuel. Maybe it's not so much of a "fuel" surcharge as simply a fare (fair?) increase to cover the cost of doing business in a reasonable manner. Other airlines have appeared to match this fare increase.
The Travel Bloggers, in reporting on fare trends, says:
As I added to the comments at that site, and as I've said here many times: When an airline does not charge enough for their tickets to cover the cost of doing business, they are essentially saying to their employees you will take paycuts to subsidize the traveler out of your pocket so we can maintain market share. And that's bad for business in both the short and long run.