[QUOTE=mangeorge]
Bottom line, I think, is that if airlines cannot remain viable, they’re not charging enough for their tickets. Maybe the average middle income family of four can’t afford that trip every year to Florida to go to Disneyland. It seems that casual flying is one of those things available to the fortunate.
Ticket prices are too low because of competition, not because of providing drinking water.
[/QUOTE]
My read on it is they are taking drastic measures such as they are because many of their (high) costs are fixed, their recent exposure to geometric increases in fuel prices is highly variable, and consumer willingness to absorb these costs is limited.
Operating airlines profitably is tricky at the best of times. Millions and millions of dollars are spent by every airline every year on “revenue management” software and modelling – basically, figuring out the “right” witches’ brew of byzantine fare classes and rules that will lead to maximal revenue per mile flown.
Every airline executive would be deliriously happy to “charge enough” for tickets if he thought he could get away with it – they’d gladly fill their aircraft with 120 businessmen paying $11,500 each to fly Business Class from Boston to Sydney. And I’ll assure you, those businessmen would not be wanting for water or other creature comforts.
Unfortunately for the airlines, a good part of the actual flying public (or the flying public that has emerged in the past 20 years with LCCs) is fairly price-conscious, views air travel as a commodity to be selected based on cost, etc. In short, they’ve created a customer base whose expectations about the cost of air travel are based in an era of much cheaper operating/fuel costs.
I’m assuming someone has run the models and determined that when oil quadruples from $30 to $120/bbl, you can’t simply, say, triple the cost of the lowest economy fare without destroying ticket sales among a large part of the customer base. One could say, okay, the airline could just adjust supply to meet demand, and they are doing that by cutting flights, mothballing planes, etc. But airlines make money by having relatively-full planes in the air, most of the time, not by parking them in the desert, and flying routes with 16 passengers on a 140 passenger plane becomes a death spiral because it’s not all that much cheaper to fly a near-empty plane than a full one.
All of which leads to: the airline’s Prime Directive is to fly full aircraft, and they will price tickets accordingly to get people in the seats. If the U.S. public is resistant to increases in “fares,” then “fares” will be kept artificially low but the airlines, once they have you in the seat, will immediately try to claw-back this subsidy any way they can – fees, surcharges, a la carte amenities. Irritating*, but economically quite rational.
*The airline exec would say we (if “we” are flying in economy, domestically) don’t even have much right to claim irritation – at least to hear the industry people tell it, domestic economy is marginally profitable at best, and business/first class full-fare sales are what subsidizes the rest of the operation for most mainline carriers.