This may not be a popular or welcome post, but I feel I need to state some facts (or my opinion). How do you solve the Airline mess? RAISE PRICES on airline tickets.
- American Airlines grounds 100 MD-80 twin jets on Wednesday April 9th, 2008 for immediate maintenance inspections. Each MD-80 can hold 100 passengers and this action cancels 1,094 flights.
- ATA, Aloha and Skybus Airlines closed for business last week. ATA may come back after a Chapter 11 bankruptcy due to financial problems, but it may take awhile. They have been in business since 1973. Aloha had been in business for 61 years and recently had to lower fares to compete with Mesa Air Group’s inter island passenger flights.
- Rising jet fuel costs– You thought the $50 you spent at the gas pump filling your car was high. Imagine hundreds of gallons of fuel for each flight. Each cent increase of fuel costs is huge to the airline industry.
- Slowing economy– All over people are seeing the slow down and deciding to hold off on some purchases. Instead of taking a long distance trip, they will take a local one and save money. More companies are using teleconferences and webinars to get business done, rather than pay for the flights, hotels, meals and included costs of face to face communication.
- Workers pay– Month after month you see another part of the airline industry “in talks” or on strike to improve their compensation, be it dollars or benefits. The three main groups I see are Airline Pilots, Mechanics and Airline Attendants (the term keeps changing).
- Pension plans– Very closely related to pay, most of these plans are underfunded. How many plans need to be taken over by the Pension Benefit Guaranty Corporation (PBGC). Do you know what money is used by PBGC to makeup the difference in funding for pension plans? Taxes!
These are just a few of the issues about Airline woes. Rising ticket prices would solve some of these problems. Although raising prices would decrease the number of people flying, I think in the long run it is needed. On the short term due to the price elasticity of demand for airline tickets will hurt for a little bit. (I can explain price elasticity of demand in another post.)
This is always a big marketing question that is often overlooked-
Am I charging to little for my product or service?
You don’t know unless you do some testing.
More posts to read about this Debacle:
Check Your Prices,