Comments on: Deloitte’s Simonetto: “It’s easy to view this as the big, bad airline taking advantage of travelers”

By: 5 easy way to avoid a la carte anarchy when you fly

5 easy way to avoid a la carte anarchy when you fly — Thu, 21 Jan 2010 11:22:36 +0000

[...] But that isn’t the direction the travel industry is moving in. In fact, according to Mike Simonetto, the principal and global leader of Deloitte Consulting’s pricing and profitability practice, travel companies are inching closer to a “zero” fare, in which the base price is free and everything is added on to it. “Free is not necessarily bad,” he told me. “If you think of the comp model in Vegas, you’re getting the room for free, but [the resort is] making money from gambling.” You can read my entire interview with Simonetto here. [...]

By: Jasper

Jasper — Sat, 19 Sep 2009 12:33:45 +0000

If it quacks like a duck, swims like a duck, and walks like a duck, it’s a duck, even if you market it as a swan.
Unbundling is a nuisance to travelers, even if they try to market it as an improvement.

By: Andy

Andy — Fri, 18 Sep 2009 20:34:05 +0000

@Jimlt…

I don’t think you’re understanding the cable TV analogy correctly. By “paying a premium” he means the following: If, say, he is currently paying $50 a month for 50 channels, that’s an average of $1 per channel. By paying a “premium” he means that if he only wanted to watch 5 channels (which should cost $5), he’d be willing to pay something like $8 per month for those 5 channels instead of paying $50 for all 50 channels. That extra $3 is the premium.

@Alan Nimby…

That’s a great example. The snack bar can either charge you $2.95 for everything or unbundle the options. I, personally, do not like butter or salt in my popcorn. Therefore, with the pricing scheme you mentioned, I would only be paying $2.55. However, if there was no unbundling, then I, along with everyone else, would be paying $2.95 for everything, even though I would just throw away the salt and butter. Now you explain to me how that’s fair.

By: Carver

Carver — Fri, 18 Sep 2009 18:33:34 +0000

@continuum

Why go to a consumer advocate who is just as biased.

@others

I just from SFO-LAX yesterday for $39.00. My fare has gone down, so perhaps it actually works.

By: James

James — Fri, 18 Sep 2009 18:15:56 +0000

This seems to me like a reasoned explanation of how many industries are thinking about pricing these days. And given the business challenges airlines are facing, I can’t say I blame them for looking to alternative pricing models. If they don’t operate profitably, they go out of business. If they go out of business, the competitive landscape shifts toward more monopolistic practices. I predict the pricing environment will remain in a state of flux for years to come, with new options showing up from time to time … and lots of experimentation.

By: Continuum

Continuum — Fri, 18 Sep 2009 17:40:40 +0000

Why go to a man who makes his living off consultation to the airlines for an honest, forthright appraisal of the airline “unbundling”, ie. adding fees.

It would be educational to interview a consumer advocate who can fully explain the airlines price gouging, the airlines control of the FAA, and the airlines massive lobbying in Congress. Then, we’d get a better perspective.

When I hear about unbundling, I remember the old Texas saying “Don’t piss on my boots and they try to tell me it’s raining.”

By: Alan Nimby

Alan Nimby — Fri, 18 Sep 2009 16:51:25 +0000

You go to the cinema.
Buy some popcorn. Sign says Small Popcorn $2.00
“I’ll have a small popcorn, please.”
That’ll be $2.00 please
Plus $0.30 for the butter
Plus $0.10 for the salt
Plus $0.25 for the bag
Plus $0.30 tax
Total price $2.95
Revenue management.

By: David Z

David Z — Fri, 18 Sep 2009 16:23:48 +0000

This is a fantasy, but just once I’d like to see an airline turn this trend on its head and publish no-B.S., all-inclusive fares where the amount they advertise is the exact amount of money you’ll be charged.

Currently Frontier Airlines is doing this as Chris blogged about before.

By: Stephen

Stephen — Fri, 18 Sep 2009 16:16:14 +0000

Frostysnowman hit the nail on the head. The cleverest thing the airlines have done is call “added fees” by the friendlier term “unbundling”, which makes it sound like a benefit. Unfortunately, this misnomer is now accepted, and continued use of it must make the airline marketing departments happy.

The telecom comparison is interesting. We all know that as “nickel and dime-ing”, where fees are less than $5; but with the airlines, it is hard to call $50-$150 fees “nickel and dime-ing”.

By: KF

KF — Fri, 18 Sep 2009 15:35:28 +0000

Talk about tap-dancing around an issue. I guess ‘unbundling’ is the new excuse for not reducing fees now that fuel prices have fallen – at least that’s the excuse the airlines were making last summer for all their new fees, particularly the baggage fees and removing things like A/V systems and pillows

Although I travel light, the baggage fee is an annoyance for several reasons – 1) More people are now attempting to carry on over-sized bags and airline personnel are not routinely enforcing size or quantity limits (and people are also attempting to get their bag gate-checked for free), overfilling the overhead bins, impacting safety and boarding times and generally annoying those who do follow the rules. 2) Paying the fee does not guarantee the bag will show up when and where you do (except for Alaska offering refunds) or the airline or TSA not going through your luggage and removing items.