At a time like this, I like to hand the mike over to Ben Baldanza, the airline’s CEO. I did this morning, but his handlers said he couldn’t answer my questions by phone. Here’s a transcript of our awkward email interview.
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It’s no secret that recent moves by airlines to impose new fees on checked-in luggage, which I discussed at length in yesterday’s MSNBC column, will hit working families the hardest. But should families hit back?
Reader Steve Savage thinks so, and he e-mailed me with an idea that has some merit. Leisure travelers, he says, should skip the plane trip out of principle.
“Every family that was going to take a leisure-industry based vacation this year should instead change their plans and take a week off at home and do something local,” he says. “Go to a water park. Pick a campsite to go to. Use what your city offers.”
If enough families boycott air travel, the airlines will get the message, he says. And maybe air carriers will change their family-hostile policies as a result.
Why would a boycott work?
The existence of substitutes allows people to explore lower-cost alternatives that may indeed be just as relaxing and cost far less money, in addition to having a far lower hassle factor.
The leisure and travel industry is subject to the same rules of economics that every other business is. Specifically, they have fixed costs, and must cover those costs. That spurs them to do two things — have as high an occupancy rate or load factor as they can, and test the limits of elasticity of demand viz. basic rates and, especially, add-on fees and surcharges.
Since occupancy rates and load factors are already high, they then become tempted to tack on additional fees and surcharges, hoping, as your column points out, that people will just sort of go along with those fees since they don’t want a hassle.
But of course this is where a boycott can cut against them. We know that airlines need about a 60%+ load factor to be at break-even. If memory serves, the lodging industry also needs about that much in terms of occupancy.
I doubt that 60% of the people on an airline or in a leisure hotel or on a Caribbean cruise are there for business purposes. And even if they were, all that does is get the industry to a point they are breaking even. It does not get them to profitability, something their shareholders are going to demand at some point.
Savage suggests that even though business travelers account for a disproportionately large portion of an airline’s revenue, they still depend on leisure travelers to turn a profit. That’s why he believes a boycott would be highly persuasive.
We know from basic business that revenue is marginal. The first passengers or guests pay the fixed costs, including some labor just to run the company at a bare level and turn the lights on, so to speak. The next batch pay the variable costs, and allow the company to hire extra labor or lease more aircraft in proportion to occupancy or load. But past a certain point, one does not need more and more flight attendants on a flight or bellhops at a hotel or jet fuel in the tanks.
This is where the viability of a boycott comes into play. Take any segment of the leisure or travel industry below its break-even threshold and they have a problem. They still have to turn on the lights, but they don’t have enough leisure travelers to fill the last rooms or seats, whose revenue flows straight to bottom line, and so they suffer.
They will be forced to start by cutting out the ridiculous fees and surcharges. If that does not work, they will need to lower room rates, but since they are relatively prosperous we know they have room to do that, no pun intended.
Finally, Savage argues that the airlines would quickly cave in because of their fears that “leisure travelers will realize that life can go on without a trip to Disney or a Caribbean cruise.” That’s a good point.
I think a boycott is an interesting idea, but it would have to be embraced by a lot of leisure travelers in order to work.
What do you think?
