Tag Archives: airlines

An Ode to Low-cost Airlines Disrupting the Industry

A funny thing happened to me when recently researching airfares for an upcoming trip. While looking at cross-country flights on Southwest Airlines for a route that I have flown dozens of times over the past two years, I noticed a price I had not seen so low in years. Not marginally lower, but 33 percent lower. Surely it wasn’t a typo. Nor was it simply Southwest Airlines’ attempt at being charitable. So what is the explanation?

Frontier Airlines.

After doing some more research, I learned that Frontier Airlines recently announced it would begin servicing the exact route I was researching, beginning in the fall. Obviously, the additional competition caught Southwest Airlines’ attention, which, in turn, caught my attention. As any frequent traveler knows, unless you’re flying short flights to undesirable destinations, Southwest Airlines is no longer the “low-cost” carrier that propelled it to widespread success and adoration. In fact, I often find it among the most expensive options when searching for flights. This, of course, flies in the face of its advertising and endless email bombardment – but I suppose that’s an entirely different gripe.

Point is – despite the grief capitalism gets from folks such as Bernie Sanders – it does sometimes work perfectly. Why do you think we’re no longer paying $700 for microwaves or $599 for Blu-ray Disc players? More consumer options create competition, which puts pressure on an assortment of variables, chief among them, price. The airline industry is no different, although it is a very precocious industry with fewer choices than home electronics or automobiles or just about anything else. After all, the price on entry is tremendous and operations are significantly challenging. Yet, above it all, one thing remains true − more airline/flight options translate into lower costs for consumers.

This is how low-cost carriers such as Frontier, Allegiant and Spirit airlines are disrupting the industry and providing consumers with more choices, lower costs and more empowerment. Additionally, as consumer technology and customization have changed consumer perceptions, expectations and purchase habits, the low cost carriers seem to be ahead of the curve with their business models.

To be clear, the major carriers still vastly dominate schedules and routes due to overall fleet size. While Frontier, Allegiant and Spirit are all growing in size, their fleet sizes still pale in comparison. Each of the low-cost airlines has a fleet around or under 100 planes. Compare that to the size of Southwest Airlines (704) or Delta Airlines (1,426) and it’s easy to see why the little guys are still considered little. Very little. Yet, consumers are clearly catching on. Frontier Airlines’ net income rose tenfold from 2013 to 2014. Allegiant Air quadrupled from 2014 to 2015. And Spirit Airlines saw net income growth of 79 percent from 2013 to 2015.

The most common criticism of low-cost carriers is the “nickel-and-dime” approach they have with fees. It is commonplace for these carriers to assess fees for select seats, baggage and even carry-on bags. For consumers not informed or expecting this, it is seen as excessive and tawdry. However, there are two realities associated with this: the new normal and consumer empowerment.

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Airline fees have become the norm.
We were asked to feel sorry for major airline carriers when the cost of oil skyrocketed a few years back, causing them to saddle consumers with baggage fees. Yet, when oil prices tumbled to their lowest level in decades, the airlines forgot to raise their hand and inform us these fees were being taken away. Excluding Southwest Airlines, baggage fees are standard across the industry. And the latest JD Power report confirmed that American consumers have given up fighting them – and have become accepting of airline fees. Even fees for seating choices have become more prevalent. If you think the low-cost carriers are the only airlines charging fees for seat selection, you haven’t flown American Airlines recently. Flying a red-eye from Las Vegas to Miami, I was presented with additional fees for my seating options. Wanting to sleep on the cross-country, red-eye flight, I paid $37 (each way) for a window seat in the middle of the plane. Want extra legroom and to be closer to the aisle? That will cost an additional $58. This is why I am dumbfounded when I hear, read or see these types of nickel-and-dime fees being groused at regarding the low-cost carriers. They exist elsewhere. And they are higher than the $12 lowest fee charged by Frontier Airlines.

Consumer Empowerment
With the low-cost carriers, consumers are able to purchase lower fare tickets and then make their own decisions on how much more they want to spend. Here’s an example of how simple this is for me: looking for nonstop service for a trip August 25–28 from Las Vegas to Orlando, a round-trip ticket on Frontier Airlines was $215.10. A similar itinerary on Southwest Airlines was $419.96. That is a difference of $204.86, or 95 percent. Even once I pay for a seat ($12) and choose to check two bags ($70), there is still a difference of $122.86. But what if I don’t need to check two bags? What if I’m visiting a summer home stocked with clothes and don’t need to check a bag at all? Instead of having inflated costs and the illusion of “free bags” stuffed into my Southwest Airlines ticket cost – I get to make my own decisions. And in my opinion, that is the point with these low-cost carriers. Consumers are more in control of their final costs, and it doesn’t take much to avoid excessive fees. On a trip last fall with my two children, we chose a low-cost carrier and approached it with minimal intelligence. We checked one large suitcase, instead of three smaller ones. We selected standard seats. We also packed snacks and iPads into our backpacks for the plane ride, as “personal bags” are free, while carry-on bags result in a fee. The result? Overall ticket costs that were more than 60 percent lower than they would have been any other major carrier.

To be sure, these low-cost carriers have work to do. Customer-service scores rank low on Frontier. Spirit is the worst in the industry for on-time arrivals. And Allegiant has been questioned regarding the age of its fleet. But each of these airlines seems genuinely committed to improving on these marks. In addition, Frontier recently announced 42 new routes and Allegiant has plans to purchase newer Airbus planes. But the larger point is that these airlines are a net positive for an industry that hates competition (see: domestic carrier open skies agreement) and is slow to provide customers with the type of service we expect from other industries (imagine showing up for a salon appointment and being told there is a three-hour delay and switching to a different time will result in a $100 change fee and the difference in cost of the new stylist?!). Consumer empowerment and more choices are a benefit to all of us. After all, that is the hallmark of capitalism.

It’s also why you can purchase a Sony Blu-ray Disc player at Best Buy for $34.99 + tax.

 

Disclosure: R&R Partners has a current affiliation with Allegiant.

This Week in Travel & Tourism — 8/20/2012

INTERNATIONAL

Mexico City efforts include medical tourism, green programs

Mexico City is on the move with new initiatives and programs designed to garner specific market segments, capitalize on the destination’s myriad offerings and showcase its total product line. The city’s minister of tourism, Carlos Mackinlay, said that “tourism is a key economic generator of Mexico City,” representing 7% of its gross domestic product.

DOMESTIC

USTA will highlight importance of travel at political conventions

The U.S. Travel Association has announced its Vote Travel 2.0 plans for the upcoming Republican and Democratic national conventions. The multipronged initiative seeks to inform policymakers about the crucial economic role of travel and tourism. “We are pushing a message that will stay with attendees — that the travel industry generates $1.9 trillion in economic output and includes 14 million of U.S. jobs — and without it, the conventions wouldn’t be possible,” said Blain Rethmeier, U.S. Travel’s senior vice president for public affairs.

AIRLINE

Interjet applies to serve six U.S.-Mexico routes

Mexican carrier Interjet applied to the Department of Transportation for authorization to begin service on six U.S. routes. The routes are: Mexico City-Orange County, Calif.; Guadalajara-Orange County; San Jose del Cabo-Orange County; Toluca-Houston, Toluca-Chicago and Toluca-Las Vegas. Aeromexico and Volaris serve Las Vegas from Mexico City. Toluca is a secondary airport serving Mexico City.

JetBlue reportedly will boost flights to Colombia

JetBlue Airways is looking to increase its flights to Colombia, a newspaper based in Bogota, Colombia, reports. Portafolio also reported that JetBlue will add a route between Bogota and Puerto Rico in 2013. The carrier is also considering flights to Cali, Medellin and Barranquilla, the newspaper says.

Southwest explores flying outside continental U.S.

Southwest and Transport Workers Union’s Local 556 are waiting to see if flight attendants approve a measure that would allow the airline to fly routes to Hawaii, Alaska, Puerto Rico and non-U.S. destinations. The union president says the deal would be a launching pad for the airline to plan for growth.

Window, aisle preferences could cost you

Airlines including US Airways, Spirit, American and Delta are imposing fees for window and aisle seats, two popular flier preferences. According to 2012 data from Expedia, 21% of customers chose window seats, while 20% preferred to sit along the aisle; the rest had no preference.

Airlines could continue to test demand with fare increases

A successful fare hike on trips shorter than 500 miles by Southwest Airlines could signal more airfare increases this year. “I think they are testing demand and they will continue to do it for the rest of the year,” said Rick Seaney, founder of the travel website Farecompare.com.

CRUISE

Agents are getting more online options for cruise training

More cruise lines are launching online cruise-training programs to improve agents’ skills in selling their products, this feature says. Training modules include destination education, brand orientation and sales and marketing training.

Cunard announces world itineraries for its 3 Queen cruise ships

Cunard Line has unveiled the 2014 world-cruise itineraries for its three Queen vessels — flagship Queen Mary 2, Queen Victoria and Queen Elizabeth. Queen Mary 2 is set to visit 19 countries around the world with overnight port destinations including Hong Kong, Dubai, and Cape Town, South Africa. Queen Elizabeth will visit Japan for the first time with port calls in Kobe, Kochi, Nagasaki and Yokohama. Queen Victoria will traverse the globe on a 116-day sailing that will visit 40 ports in 19 countries.

Carnival tries out drinks program about the Carnival Victory

Carnival Cruise Lines is holding a trial run of its “My Awesome Bar Program,” giving passengers access to a variety of alcoholic and nonalcoholic drinks for about $50 a day including tips. The package is available to passengers 21 and older aboard the Carnival Victory.

MGM

MGM Resorts proposes $800 million Massachusetts resort

MGM Resorts International has proposed building an $800 million entertainment-retail resort in Springfield, Mass., that would have 250 hotel rooms and 89,000 square feet of gaming space, as well as 200,000 square feet of retail and restaurant space.

ETC.

Hotels take up growing juice trend

Juice bars and juicing-themed packages are popping up in hotels in response to the growing wellness trend, this feature says. “Hotels have taken notice that their travelers, especially those that spend time in the spa, are looking to keep their bodies healthy on the road. These clients are not interested in spending time and money detoxing in the spa only to fill up on unhealthy, processed food,” said Linden Schaffer, director of wellness-travel firm Pravassa.

Google ignites speculation with Frommer’s acquisition

Google’s announcement last week that it would purchase Frommer’s, the iconic publisher of print and electronic travel guides, touched off a wave of speculation over the search giant’s motives and what the move might portend for the travel industry.

This Week in Travel and Tourism – 4/16/2012

INTERNATIONAL

MGM eyes Toronto for sprawling integrated resort and casino

MGM Resorts International has begun reaching out to Toronto officials to put forward a possible resort-casino project in the city. The potential $2 billion to $6 billion project could include hotels, convention space and restaurants. “It’s an amazing market, it’s an amazing city. We’d be prepared to invest an awful lot in the development of the concept,” said Alan Feldman, a senior vice president at MGM.

AIRLINE

Southwest’s AirTran to Keep Fees Three Years After Merger

Southwest Airlines Co. (LUV), the only major U.S. carrier without bag-check and rebooking fees, will keep those charges at its AirTran Airways unit into 2014, three years after the two combined. That’s the target date to fully integrate AirTran into its Dallas-based parent, and the fees will stay in place until then, Chief Executive Officer Gary Kelly said today in an interview.

AirTran to launch Orange County’s first Mexico service

AirTran will launch once-daily service from John Wayne Airport in Santa Ana, Calif., to Cabo San Lucas and Mexico City on June 3. It is the airport’s first Mexico service.

CRUISE

Cruise lines and tour operators eat costs of higher fuel

As gas prices flirt with the $4-per-gallon mark for the first time since 2008, the travel industry is anxiously bracing for signs of what impact higher fuel costs will have on summer travel. While airlines have been steadily increasing fuel surcharges for transatlantic flights and raising domestic airfares to cover costs, tour operators and cruise lines interviewed for this report said they are still absorbing the additional costs. None were yet willing to say they planned to implement fuel surcharges this year.

Norwegian Getaway to sail from Miami year-round

Norwegian Cruise Line will base the 4,000-passenger Norwegian Getaway year-round in Miami when the ship enters service in the spring of 2014.
Theme Cruising Gains Popularity

Travel agents should seize on the growing popularity of theme cruises, which offer an opportunity for agents to attract first-time cruisers and increase their client base, travel sellers say. Suppliers are joining the trend with special-interest voyages, featuring a wide range of themes, including bowling and classical music.

ETC.

Airlines lose fewer bags, arrive on time more often in February

The nation’s largest airlines set new records in February for the best on-time arrival rates and the lowest lost luggage rates. The airlines had some help in providing such improved service: February’s weather was unusually mild across the country, and airline industry experts say airlines are losing fewer bags because passengers are packing less luggage to avoid bag-check fees. In February, 86.2% of the flights flown by the nation’s airlines arrived on time, up from 74.5% in February 2011 and 83.7% in January of this year, according to Department of Transportation data released Thursday.