Fixing Fares

Fixing Fares : A Do-It-Yourself Guide

Your Chance to be an Airline Executive!

Airline executives admit that they can't fix their broken airfare structure, so here are some suggestions from readers about what should be changed to restore fairness and encourage air travel. Send a copy of this article to your favorite airline CEO!

These suggestions were given by readers who replied to my 21 June article on air fares.

Reader's Replies : If you'd like to add your own commentary, send me a note.

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My column on 21 June detailed the problems that the airlines face in trying to set air fares to get the maximum revenue possible, while still selling the most number of tickets at any price.

Here are some solutions proposed by readers. Not all of them would solve all the problems and address all the 'opportunities' discussed in the earlier article, but a lot of them would certainly make things a lot easier for us - the customers!

Eliminate Discounts, and return to 'The Good Old Days'

Phyllis writes : I began working for Delta Airlines in 1958. We had five fare types : first class (F), coach (Y), first class night (FN), night coach (YN) and family plan (FP). If I remember correctly, the YN fare from Chicago to Miami was $179.00 roundtrip and the Y fare was $212.00. With family plan, I believe the head of the family paid full fare and other members of the family received a 33% discount. The domestic carriers were purchasing jet aircraft and there was a $2.50 surcharge for flying on a jet.

This gave the business traveler a fair fare, and families a break. Perhaps someone should take a look a the fare structures that have been successful. It would be interesting to look at the fare structures vis a vis the profitability of the airlines.

The airlines should get rid of all discounts. They need to determine what they need to charge for an airline seat to be profitable, and then charge this price irregardless of who is selling the ticket. It's Business 101. I know it is not quite this simple, however, I believe if the airlines and the travel agencies did not have to spent so much time explaining fare structures, complicated rules, etc, we would all be more productive and it would go straight to the bottom line.

Tom agrees with this and says : KISS--Keep It Simple Stupid! That should be the guiding principle behind all airline fare structures. AA tried to simplify everything a few years back and got scared off because NW didn't match its new fare structure. So, what was Crandall quivering about? If he really believed in it, he'd have kept it and duked it out with NW in the marketplace. (Betcha he'd have won big time.)

Instead, things are hopelessly out of control, especially because we must now cope with Internet fares. You can't call an airline any more and get the same fare quotes that you get on web sites. SO WHAT IF SEATS ARE PERISHABLE? Why should a web site have different information from an airline ticket agent?

Then, each airline seems to have its own "rules" for people who buy Internet fares (e.g. United says no upgrades, even for 1Ks--which I happen to be; AA sometimes says no frequent flyer miles, even though you may have paid hundreds of dollars for this ticket).

There is no way that even the most sophisticated customer can understand all the self-righteous "rules" that airlines are now creating on a willy-nilly basis. Even a graduate degree in "ticketology" won't help unless you stay posted on a daily basis.

Don't Charge Exorbitant Fares

Many of you have a horror story about just how expensive an 'ordinary' journey can potentially be. For example, Sharon tells : This month I was charged $890 for a round trip from Houston, TX to Philadelphia, PA. I could go anywhere in the world for that price! I could take two people to London for that price! Two years ago, I paid an average of $350 for a non-restricted flight. What is this about? I am not going anywhere exotic - not even to California. This was US Airways which is my basically my only choice (if I don't want to spend 6 -12 hours traveling) --I am appalled!

Roger points out what happens to an airline when it gets too greedy. Although a United MP1K frequent flier, he has been giving increasing amounts of his business to American recently : I'm not after 'simple' as much as I am 'rational' in a fee structure. Six of my last seven roundtrips between Raleigh NC and Portland OR have been on American. On each of these occasions I was quoted a fare ranging from $975 - $1850 per roundtrip by United, against which AA were charging 'only' $485. Let me emphasize that all the American tickets were purchased after I had tried to buy on United, so the dates and times were the same for each. Indeed, the American flights departed and arrived PDX/RDU within 1 hour of the United flights.

I feel a certain amount of anger that even though I've been a loyal United customer over the years (and therefore have the overwhelming majority of my frequent flyer miles with them), I would be quoted such radically higher prices. Of course none of this is personal, but the resentment is nonetheless present.

Make Last Minute Tickets Cheaper, Not More Expensive

George suggests : Why can't the airlines simplify the fare schedule? They could have a set fare schedule for anytime up to one or two weeks (or pick another length of time) that takes into account class, departure time, and departure day. Then, within that last window of time, fares could reduce in price by a set amount or percent until the last minute available to purchase a ticket on that flight. Have the airline officials never seen sales at retail stores? The airlines would lose their ability to balance their fare structure/average like they want to do, but in the end, they'd probably make more money.

Let Tickets be Non-refundable, but Transferable

Howard suggests : As each seat is a perishable item, it ought to be priced fairly, based on 90% of the "average" loading for that flight, and absolutely non-refundable. The non-refundable part is the crucial part. We've been led down the pathway of thought that if we miss a flight, its not big deal. On the other hand, we seek to maximize our personal financial gain when the airlines overbooks, and pays us to take a later flight. In business, little is planned so far in advance that we can book two or three weeks out. Make your plans, and live up to the fact that the seat is a perishable item. Disallow overbooking, but also disallow refunds for missed flights. Sorry, if I miss the flight, it is MY fault. I don't get to ask the Boston Bruins to replay a game just because I missed the game. That too was a perishable seat. The "net" of this is that the airlines realize the revenue they seek, guaranteed, for a particular flight, and the travelers actually have a snowball's chance in hell to understand what it will cost to get from point A to point B!

Joshua builds on this concept with an extra twist : How about a simple airfare structure, including all non-refundable tickets but with a secondary market for them allowing tickets to be transferred or sold to other people.

Airlines Should Follow the Same Rules that other Retailers Do

Steve writes : The airlines - as an industry group - are ignoring the marketplace just like the steel industry, the shoe industry and other large industry giants who refuse to change. They seek billions in bailout money from the federal government (which each of us pays) but they still refuse to give the consumer what we are looking for. What other industry can hide their pricing (it must be so bad they are embarrassed to show the public), change it without prior notice, not give refunds, and charge exorbitant fees for changes and cancellations. And when you change a fare and pay the ridiculous fee you may also end up paying a much higher fare, wow a double whammy!!

In the retail world (which airlines are actually in) retailers must display their pricing prominently, retailers must state how long the advertised pricing is available for, and they give refunds and/or exchanges with no questions asked! Southwest openly states their fares and if they are available, and tells you which fares are changeable/cancelable. Gee, Southwest is giving the consumer what they want and they are doing very well financially! The big airlines need to either adapt or they will die like the dinosaurs, and take our bailout money with them!!!

Copy Southwest

By far the greatest number of reader suggestions were to have the traditional carriers copy the Southwest model. For example, Gary says : Adopt the Southwest Airlines model - lock, stock and barrel. Scott says I'd simply go hire a new management team by making some people at Southwest Airlines an offer they can't refuse. They already reinvented that wheel!

Jeff is more specific : The success of airlines with simple fare structures such as Southwest (and Jetblue on a smaller scale) has everything to do with their fare structure...everything. When I fly Southwest or Jetblue, there is no question in my mind about the value of the seat. I know what I paid, and I know exactly how much more, or less, I could have paid based on very specific criteria; criteria that is extremely simple to understand, and very straightforwardly presented. This makes a world of difference to me. I trust Southwest more than other airlines because of how fair their prices are. I trust them because they don't seem to be trying to put anything over on me.

There is no worse feeling then sitting on the American or United flight from LAX to JFK after having paid the $1800 last minute fare. How much is my seat worth? How much did the guy next to me pay? The woman behind me?

Lloyd adds : Southwest's pricing structure makes sense and I see no reason other airlines can't follow suit. Instead they try to gouge me with "business fares" that are higher than I am willing to pay. What do I do? I plan ahead. I book back to back trips that include Saturday night stays. Sometimes I end up discarding part of the tickets, but I still save big bucks. I pay "leisure" fares, like many other people, and the airlines can't figure out why there revenue is down? If they had rational fares like Southwest, I would pay a slight premium over other airlines "leisure" fares to avoid the hassle. The majors would also recapture some of the business going to the discount carriers.

The 'Best Answer' of All?

Sadly, there isn't a perfect or single solution to the problems the airlines find themselves in. Truly - if it were easy, they'd already be doing it! Seeing as how this week's column is primarily 'your' column rather than mine, I'll leave it you, the readers, to have the last word. Bob (who is either in MD or an MD!) sums up : I don't have any answers to your questions for a better fare structure, but I thought your article was very well presented and fair (no pun intended) to even the airlines, when you clearly explained all the economic pressures that many of us do not think about.

And, why will the problem never be solved? Gary puts his finger fairly on the problem : There is no answer to your question on rational fares, for the simple reason that these companies are prisoners to their dumbest competitor. They aren't so stupid that they don't know a rational pricing structure would serve them better, but when they try (like AA a few years ago), it's only a matter of time before an airline with no business and too much capacity drops its prices. Bingo! At that point, everything just goes on to it's illogical conclusion, and you end up with what you have.