Not FareDeregulation Does Not Mean Lower AirfaresTuesday, May 13, 2014
Was flying cheaper in 1975 or 2014? You'll be surprised by the answer, even factoring in inflation.The answer is 1975.It shows the effectiveness of the airlines' smoke and mirrors pricing that fools you into thinking you're getting a good deal.But the actual price of flying has risen sharply since deregulation of the airlines, and far outpaces the inflation rate of the last 40 years. It also turns out that these airlines are making a lot of money. Surprise!Business Travel Columnist, Joe Brancatelli, came out last week with an eye-opening piece showing that deregulation has not benefited air travelers financially. This is in direct contrast with what the airline's lobbying group, 'Airlines for America', wants you to believe - that airfares have never been lower.The truth is that the cost of flying has risen sharply since the dawn of deregulation and has far outpaced the rate of inflation over the last 40 years.You can always count on obfuscation from Airlines for America, which puts their own interests first. Maybe if they keep telling us it's getting cheaper we might believe it.This group is also opposing FlyersRights on the cynically named Transparent Airfares Act, which would make prices more opaque and hide the real cost of flying from travelers. These powerbrokers also fought FlyersRights on a 2012 bill that would require families to be seated together on flights.How do you prove the cost of an airline ticket was cheaper 40 years ago than today? Factor in the products and services that were stripped out of the ticket by the airline's mission to remove as much as possible from the published airfare, and charge separately for them.Everything from a comfortable coach seat to an in-flight meal has been "unbundled" and is now sold a la carte. This paradigm shift has brought the airlines record profit, but it also hides the true cost of flying and makes it nearly impossible to do apples-to-apples comparisons.In fact, the modern airline industry doesn't even care about fares when making financial judgments. Airline executives rely instead on PRASM--passenger revenue per available seat--a statistical measure that more completely represents the total amount you now pay to fly.While we don't believe everything needs to be bundled into the airfare like it was in 1975, it is astonishing to see how the airlines have jacked up prices under the guise of offering passengers "choices" by creating an ever-expanding array of fees for services that once were included in the price of a ticket.Last week, the cheapest LAX-O'Hare one-way refundable fare sold by American Airlines was $508.
But now come the extras. Want to book your ticket via American's call center, as you would have in 1975? That's a $25 charge. Want the kind of boarding privileges you'd get back in 1975? That's another $25.
Back in 1975, American Airlines flew between Los Angeles and Chicago with widebody DC-10s and seats were wider with more legroom. To approximate the same comfort on the Boeing 737s that American flies today, you must pay $68 to book a seat in the Main Cabin Extra premium-economy section.
An inflight meal was included in 1975's fare, but that'll cost you $10 today.Then there's luggage. In 1975, your $138 fare included two checked bags that could each weigh 70 pounds. Today, checked bags are an a la carte affair. The first is $25 and the second is $35. But those bags can't weigh more than 50 pounds. Want to check 1975's load? You'll also pay an excess-bag fee of $100 each.
Wear luggage to avoid fees?
Add it all up and you come to $896.
Simply put, you'll pay $896 today to approximate the full value you received in 1975 for an unrestricted coach flight between Los Angeles and Chicago. That's 30 percent more than the inflation-adjusted 1975 fare of $628.
But let's fly on the cheap and see what happens. The lowest fare in the Los Angeles-Chicago market on American in 1975 was $97 one-way based on a round-trip purchase. Add in the premium for frequent flier miles you receive today and adjust for nearly 40 years of inflation and you're talking about the 2014 equivalent of $450.
What will you pay today? Buy the same services
Full mental jacket. -Andrew Styczynski/The Sununbundled from American that you received in 1975 and it's $867. Buy a partially bundled fare product that American calls Choice Plus and you'll pay $622. But subtract $14, the value of a mileage bonus you receive when you purchase a Choice Plus fare, and it's $608. That's still a 26 percent premium above the inflation-adjusted 1975 fare of $450.
Back in 1975, things were simple. All fares were refundable and bundled with a plethora of services. According to a contemporary edition of the OAG North American Edition, the cheapest unrestricted one-way flight on American Airlines cost $138 including taxes. Adjusted for inflation, that's the equivalent of $600 today.
One perk included with today's prices that didn't exist in 1975 is frequent flier credit, so Brancatelli added $28 to cover the value of the 1,745 American AAdvantage miles you'd earn today. (However, in those days, the miles were still worth something.) Total cost of a 1975 unrestricted one-way fare in today's dollars: $628.
To level the playing field and give travelers a fair look at today's flight costs versus historic prices, please see the pair of charts below. They adjust for inflation and show what you pay today for the same airline product a business traveler purchased in 1975.
The route is between Los Angeles to Chicago's O'Hare Airport, because, then and now, it is a high-traffic market popular with both leisure and business fliers. Then and now, United and American Airlines dominate at O'Hare and have substantial flight operations at LAX. And the Los Angeles-Chicago market remains extremely competitive because Southwest Airlines flies nonstop between Los Angeles and its hub at Chicago's Midway Airport.Notes:
In 1975, airfares were refundable, so this chart compares lowest available refundable fares then and now.
The comparison is for a nonstop, one-way flight on June 16 between Los Angeles and Chicago/O'Hare on American Airlines. The 1975 fare was published in the OAG North American Edition.The current fare was available as of May 5 on AA.com. Unbundled fees are published on AA.com or flight-specific rates offered during the booking process. The 1975 fare included two checked bags that each could weigh 70 pounds. Current charges for checked bags are for 50 pounds; 70-pound bags incur a $100 excess-baggage fee.There were no frequent flyer programs in 1975, so the chart calculates the value of a mile at 1.6 cents since a restricted-award ticket between Los Angeles and Chicago costs 25,000 miles for a trip worth $408 roundtrip at current prices.The 335% inflation rate was calculated by InflationData.com.In 1975, American flew LAX-ORD with DC-10s. Today, it uses Boeing 737s. To match 1975's comfort levels on today's flights, passengers would have to purchase seats in AA's Main Cabin Extra. That's a $68 upcharge on this route.Notes: The comparison between lowest available fares in 1975 and today is skewed because even the lowest fare in 1975 was refundable. Current lowest fares are nonrefundable.The fares listed are one-way based on a roundtrip purchase. The "unbundled" 2014 fare is American's "Choice" fare while the bundled price is American's "Choice Plus," which includes a free checked bag (50 pounds), priority boarding and waiver of ticket-change and same-day standby fees. Choice Plus fares also includes a 50 percent mileage bonus, which have been deducted from the bundled fare at the 1.6-cents-per-mile rate.
But there's an important caveat: 1975 fares, even the cheapest ones, were fully refundable. Today's cheapest fares aren't. Your only alternative is to spend another $50 or so to purchase trip-cancellation insurance from a third party--and even that doesn't guarantee a full refund.
If you really want to finagle the numbers and get 2014's cheapest LAX-O'Hare price down, you can make your reservations online and save the $25 telephone-reservation fee. Keep your baggage to the new normal of 50 pounds and you can save the $200 excess-bag fee. On that bundled fare of $608, that brings you close to the 1975 inflation-adjusted price, but only assuming you ignore the nonrefundable nature of today's comparable tickets.
Fuel Costs, Between 1975 - Now
To put fuel prices into perspective, it's probably not a factor, because the first OPEC crisis was before 1975, so fuel cost increases are close to the overall inflation rate. Until last year, even with a run up in price, we had not come close to record oil prices in terms of inflation-adjusted dollars. Now, we're blowing that record out of the water.
The only difference is that in 1973 and 1979, the price almost literally doubled overnight. The recent run-up in prices seems fast, but it's definitely gradual compared to back then.Bottom line: FlyersRights is not against profitability, just taking things away and not adjusting downward. Then giving us the option to buy back the services and amenities we want, a la carte, and compounding more profitability in double-dipping fashion.
Also, never believe an airline or its deceptively named trade group when they claim they offer a bargain you haven't seen in 40 years. They're lying.And we haven't even talked about slashed employee pay/benefits!
At age 73, I thought it was about time for me to tell the story of why I'm a FlyersRights supporter.
In 2007 a musician friend living in NYC flew down to Dallas for the funeral of his niece, and brought his guitar to play a song at her grave. On the way back, the airline demanded $237 for a seat for his guitar.
After some argument I paid for the seat, but I was P.O.'ed about how my friend was treated. A few weeks later he told me about an new organization founded by Kate Hanni, that is now FlyersRights.
Since then I've been a constant supporter. I've given close to $10,000, got permits from DFW airport for pamphlet handouts, and spent time handing them out.
I now spend some time every Monday along with another dedicated volunteer named Lee, proofreading the work of our editor, Kendall, to try to be sure the newsletter is clean, the links work, and not too many members have complaints about content.
I was raised by my 1950's Republican-believing Regular Army parents to embrace public service. In my 73 years I've changed my mind about a few things. The point being, your political opinion doesn't matter. Once we're all stuffed inside that airborne metal tube, ...well, you get the idea. I spent 6.5 years as a Regular Army Field Artillery officer, including the 101st Airborne, Germany, and Vietnam, and after that I taught chemistry at VMI for 2.5 years and then worked in DEA, ending 26.5 years later and retiring as a Senior Forensic Chemist at the end of 1995, after which I started flying a lot for world-wide SCUBA and solar eclipse trips - although not much lately.
I saw my love for travel seriously eroded after 2001, and it got worse every year. Along came FlyersRights and I thought maybe something could be done if only enough people could get behind it.
Or maybe not if it couldn't get enough support to be a contender, up against multi-billion dollar interests. I'm seriously impressed with the battles FlyersRights has won in its David vs Goliath contests.
I continue to believe in the mission of this organization and I believe in the people I've gotten to know here, who are GOOD people, who believe in our common interest as I do. They have a great mission that benefits the general public, so what's not to love? Pony up a few bucks to help yourself in the long run.
I ask you to keep on supporting this organization, because they're fighting the good fight for all of us. By the way, last week's newsletter was a killer! I don't care about your politics, but when you fly you deserve to be treated as a rational human being and with respect by these major corporations.
Unfortunately, the airline industry is very susceptible to the boom and bust economy by which the US lives and dies, combined with very high airline employee labor costs (hourly rates and benefit packages) and passengers who want excellent safety standards. The flying public needs a basic lesson in economics and more information about the liability and costs of running an airline.
Airlines are "for profit" organizations, just like the mom and pop doctor, dentist, hospital or the very large medical practice. I don't recall an MD, pharmacy or hospital offering to stop charging me for the services I use.
If it was cheap to run an airline, many small business owners would open their doors to yet another new hobby, which they call a "business" - like flipping houses, but in this case it would be running their own airline.
Recently, you were bemoaning the small airline pilot's salaries - now you are bemoaning the fees. It would be most helpful if you could identify which constituency you are supporting. It takes $ to purchase new planes, repair them, pay for gas, hire the employees to keep the operation running, develop IT systems to support all aspects of the industry, pay for the liability insurance premiums (since passengers have a tendency to sue airlines), etc.
As a frequent flyer, I see many passengers dragging bags, which are clearly too large, onto the plane because they don't want the inconvenience of checking their luggage --- in other words, they are just plain rude and inconsiderate of their fellow passengers. Airline travel is very expensive compared to driving a car and taking the Greyhound bus, but it is faster than taking the train. There are many alternative modes of transportation and just like when deciding which restaurant to go to (McDonalds, Chili's, Morton's) or stay at home to eat...it all boils down to making good decisions and working with what is in your own wallet.
If the US Government is not willing to subsidize airlines, then the passengers who choose to fly, for whatever reason, need to pay up. If your business can't afford the ticket prices then maybe you need to go out of business or turn away the business which requires that you fly to the client--it's all basic economics.
Frankly, I don't recall any government bail outs when airline employees were losing their retirement benefits and planes were mothballed in the desert post-911. Pre 911, the airlines paid their taxes and what did it get them-not a lot. And, passengers were complaining then too!!!!
FlyersRights.org has a simple philosophy, we support the rights and interests of air travelers in safe, reliable , secure air service at reasonable prices. We are not just complaining and fighting against abuses but have offered affirmative solutions in the proposed Airline Passenger Bill of Rights 2.0. This includes reasonable regulations as consolidation and protection from foreign competition now give airlines unprecedented ability to reduce service and raise prices for US airline passengers.
If you think starting pilot pay of $25,000 is ok, that airlines should be able to gouge passengers with hidden change fees of $200-500, baggage fees up to $300, shrinking seats and leg room that will soon not be enough for a 12 year old, and if you support the downgrading or elimination of frequent flyer benefits in bad faith, immunity of airlines from all state consumer protection and tort laws excepting only negligence causing physical injury or death, you might also like air travel operated like cable TV or AMTRAK. The public interest is barely heard in Washington DC where special interest money rules.
Since the 1890s, when the term 'Railroaded' was first coined, as airline profits soar while the number of airlines shrink, corporate aviation has increased 10-fold while domestic airline travel is flat, to down, over the past 20 years. The model of squeezing more out of fewer and fewer passengers is not a good business model for airlines or the public.
Editors Note: the airlines did receive a $15 billion government bailout just 17 days after 9/11.
Tuesday, May 13, 2014
Posted by K at 21:20