Chris Pummer writes in MarketWatch that “U.S. consumers complain about the airline industry like we do Big Oil when it’s our craving for the absolute lowest prices that’s crippled the industry.” Addiction to Cheap Airfares is Causing Our Own Travel Ruin.
Sure, but he’s only half right. While it’s certainly true that modern airlines are all morphing into People’s Express — and what a nightmare that was — the CEOs still sell on price alone. Less than a decade ago, business fares were 5 to 10 times as high as leisure fares, but now folks can book a cost-to-coast business trip for less than $500 at peak hours. That’s completely absurd and breaks the basic rules of business 101.
But one thing is certain, if the airline industry can screw anything up, they will. And that’s not limited to America; it’s happening in Europe too. (For an academic view, see this SSRN paper, which indicates that firms in financial difficulty are more likely to start price wars. Duh! Just look at Ryanair this week in Britain.) A better analysis blames both consumers and the airlines for the air travel mess we’re in today, like Brian Sullivan’s recent post The Baffling Airline Business: Both Sides to Blame? [Brian Sullivan Blog].