For-hire trucking could learn a few things from the airlines, because they have finally figured out how to make money in a deregulated environment.
Before I get into this installment, let me say that the promised piece on the "Culture of Culpability" is coming next week. A promise is a promise, but after 14 hours at the mercy of U.S.Air on a round trip to Las Vegas last week, I got thinking about how those folks have turned their financial houses around at the expense of the passengers. It made me wonder how trucking might do the same.
Love 'em or hate 'em, commercial airlines are the most time- and cost-effective way -- even comfortable if you compare an Airbus A320 to a cattle truck -- of moving our butts back and forth across the country. While passengers may be unhappy with being nickeled-and-dimed to death, they are paying the endless list of fees and surcharges, and the airlines are racking up record revenue increases.
The Associated Press reports that U.S.-based airlines hauled in $3.4 billion in baggage fees in 2010, a 24% increase over 2009. By the end of the third quarter 2011, 17 major U.S. airlines had collected $2.6 billion for checking luggage. Not bad for something that used to be free.
Rather than face an uprising over fare increases, the airlines downloaded the problem to the passengers, who must now duke it out in the cabin to see who gets their humongous suitcase into the overhead luggage bin first. The least the airlines could do is have the decency to enforce the carry-on size limits.
But they don't and we keep on flying. Baggage fees apparently have not diminished the public's appetite for air travel, and the price hikes haven't had any tangible impact on the national economy or GDP growth.
The airlines are actually a great example of how to recover otherwise lost revenue by tacking on fees and surcharges where they are warranted. Want a beer? Seven bucks. A sandwich? Eight bucks. You won't get a free lunch anywhere else, so why should you expect one on an airplane?
While some airlines may be going a little over the top on fees -- Spirit Airlines recently began charging passengers $5 to print boarding passes at check-in if they had not previously printed them at home -- it seems passengers get what they opt to pay for and little else. We don't always want a beer and a sandwich on a flight, but it's nice to have the option. If I don't elect to have lunch at 35,000 feet, why should I pay for the next guy's lunch by adding $15 to my ticket?
Then there are the fares. Have you ever booked a ticket less than 24 hours in advance of your planned departure? There are circumstances when you don't have the option of booking a few weeks in advance, and those poor sods, whether through poor planning or urgent need, get hosed big time.
On the other hand, if you have the luxury of booking well in advance, and don't mind a three-connection flight that departs at 0-dark-stupid that takes you back and forth across the continent a couple of times, flying is a real bargain.
The airlines use a complex pricing system called "yield management," which is rather concisely defined by Wikipedia, as the process of understanding, anticipating and influencing consumer behavior in order to maximize yield or profits from a fixed, perishable resource (such as airline seats or hotel room reservations).
The term was coined by Robert Crandall, former chairman and CEO of American Airlines, who called it, "the single most important technical development in transportation management since we entered deregulation."
Back in the days when the Interstate Commerce Commission actually enforced tariffs, trucking had the luxury of charging customers based on a menu of service offerings. Today, flat-rate pricing is the norm -- especially when dealing with freight brokers -- and that limits our ability to charge for certain services, or to recovers costs incurred in providing such services.
To me, airfare pricing is Black Magic. On the surface, there's little rhyme or reason to it. And as a consumer, I much prefer flat-rate pricing because I know where I stand. But as baggage fees have shown, $3.4 billion is a lot of money to leave on the table for the convenience of the customer.












