How Economics Helps Us Understand: Airline Practices
By Art Carden
The world is a pretty complex and mesmerizing place, and people (and firms) do a lot of things that are, at first glance, hard to understand.
Consider airlines. I’ve heard on numerous occasions complaints about how major carriers board their planes inefficiently: by using alternative loading and unloading schemes, they can turn flights around more quickly and earn more money by operating more flights.
And to be sure, turnaround time is important. However, it isn’t everything. In the last few years, airlines have aggressively unbundled a lot of what they offer. On many carriers, you have to pay to check bags unless you have elite status or a special credit card. Flyers with elite status get preferred boarding and seating. There are a lot of ways in which flying as an elite differs from flying as a non-elite traveler.
This, I think, explains a lot of the differences. Business travelers and frequent flyers pay the bills, and competition for their loyalty is pretty fierce. I didn’t realize just how great elite status was until I achieved it. I get to breeze through check-in (and security at some airports), I have virtually guaranteed overhead space that comes with priority boarding, and I can get some work done between when I board and when the door closes. These added layers of convenience make it a lot easier to pick my preferred airline, even if I have to pay a few dollars out-of-pocket on a trip for which I’m being reimbursed.
I haven’t studied airlines in detail, but my impression is that the major carriers are serving a different market than the discounters.* Hence, we see these fairly substantial differences. Am I right, or am I missing something?
*-When we moved back to Birmingham, I was excited to be back in a Southwest Airlines-served city. Delta and others usually offer more convenient schedules and are extremely competitive on price. I recall reading in the SWA magazine when I was in grad school that they see themselves as substitutes for driving.